The impact of the Russian-Ukrainian war on the shipping industry.

By Shamil Adeeb and Rishita Agarwal

Introduction

The shipping industry was impacted by the Black Sea tragedy, which caused deaths
and the loss of ships and boats. It also disrupted maritime trade between Russia and
Ukraine and increased the cost of sanctions. The International Maritime Organization
estimates that during the start of the conflict, 2,000 seamen were stuck on 94 boats in
Ukrainian ports.

Effects

The effects on the workforce, the price and availability of bunker fuel, and the
growing risk posed by cyber risk make standard operations in the business more
challenging. The Ukrainian war had a direct impact on commerce in the Black Sea
despite the dreadful conditions there and the danger it offered to seamen caught up in
the fighting. The outbreak has already resulted in a lack of personnel, port congestion,
and a long-term disruption of the maritime industry’s supply chain; the fighting has
only made matters worse.
The International Monetary Fund had forewarned that this year’s already high
shipping costs would increase dramatically and could stay there for a long time,
leading to inflation. In the 18 months that followed March 2020, the cost of shipping a
container on the world’s transoceanic trade routes climbed sevenfold, and the cost of
transporting bulk items increased even further. The majority of the war’s
consequences were felt in the Black Sea by ships going to or conducting business with
Russia. As a result of the conflict and a Russian naval blockade of Ukraine, important
ports like Odesa were closed.
The United Nations Conference on Trade and Development (UNCTAD) has
recognized issues with the Black Sea region due to regional logistics failures, the
suspension of port operations in Ukraine, infrastructure devastation, trade restrictions,
higher insurance costs, and higher fuel prices. The globalization of the shipping

industry is evident in how fleet deployment and price variations in one region of the
world are impacted by changes in demand in many other places. More than half of the
increase in food prices around the globe was caused by higher shipping expenses.
Additionally, they were higher because a) goods had to go farther, and b) there wasn’t
enough capacity for international transportation, which increased the price per ton-
mile.
The Russian Federation, Ukraine, and international grain maritime exports provide
more than 36 countries with more than half of their wheat imports. Black Sea ports
generally serve as the departure point for over 90% of Ukrainian grain exports; but, as
a result of the conflict, Ukraine’s weekly port calls have dropped from 60 to almost
nothing.
Unfortunately, carrier uncertainty has intensified due to the effects of COVID-19,
traffic, rising costs, the energy transition, as well as the growing threats brought on by
the conflict. Additionally, investment is constantly at odds with uncertainty. Although
we will need more and more modern, energy-efficient ships, shipowners and bankers
will now expect a larger return on investment than before, postponing investment.

International Sanctions & Response

When French warships intercepted the Russian roll-on/roll-off cargo ship Baltic
Leader in February 2022 as it was on route to St. Petersburg, more than a dozen
Russian-owned superyachts were taken. Russian ships were not permitted to dock in
UK or EU ports.
Only the Russian fleet had access to necessary marine services. Numerous ports no
longer allow Russian-owned or -flagged ships to bunker, and insurance companies,
classification societies, engine manufacturers, and maintenance companies have stated
that they wouldn’t engage with Russian Ships any longer.
Outside of the conflict zone, shipping was also impacted by the fighting. Shipping
firms and insurers face a sizable compliance problem as a result of sanctions imposed
by the US and the EU. The decision of many Western companies to stop doing
business with Russia has made the legal environment for contracts, including

insurance, more complex and uncertain. The price and supply of bunker fuel could
increase as a result of a more extensive ban on Russian oil, which might prompt
shipowners to look for alternative fuel sources.
Due to the physical threats posed by mines and rocket strikes to ships in and around
the Black Sea, several container firms have already left Russia. These risks have an
influence on trade, the price and accessibility of bunker fuel, as well as the safety and
welfare of crew members. Additionally, there are severe restrictions and disruptions
for the tanker business as well as bulk and general cargo companies shipping Russian
grain, timber, and coal.
Due to the many restrictions placed on Russian interests, compliance is quite
challenging. Since Russia invaded Ukraine, the West has placed a wide range of
sanctions on Russian companies, financial institutions, and people. The United States,
the European Union, and Australia have all imposed varied degrees of restrictions on
Russia’s imports of oil, gas, and coal. Russian iron, steel, coal, cement, lumber, and
luxury products were all subject to EU sanctions. While Singapore implemented
export limits on technology and military shipments to Russia, Japan halted selling
luxury vehicles and other goods to that country.
Numerous businesses and shipping associations are rethinking their desire to conduct
business with Russia in light of the reputational risk and the possibility of new
penalties. However, some sanction regimes exempt particular items, and supply chains
in other sectors, like automotive, electronics, and agricultural, rely on raw materials
and components from Russia and Ukraine. Many companies have agreements with
Russian companies that they cannot break.
Conclusion-
The impact of Russia Ukraine war will have impact on the whole world and this will
widely affect the market and the related commodities, with the world reeling from a
global pandemic the Russia- Ukraine war has further impacted and broken the back of
the maritime industry and as the cost of commodities will further go on to increase
and create a strain on the global economy and there would be further inflation and the

long term consequences would be way lot and affect the globalization of trade as
whole as some of the major companies are having their contract and source of material
in these war affected areas. With these changing times and turbulent situations
companies are looking at various other opportunities to get back to their trade and
fulfil their requirements. The current transformation will certainly affect the current
maritime routes and change the maritime industries outlook.