Maersk of Denmark, Singapore’s Ocean Network Express, Swiss-based MSC, Germany’s Hapag Lloyd and CMA of France, five of world’s six biggest cargo-shipping lines, all announced their refusal to shift containers with goods originating from or bound for Russia, as the Western world ramped up sanctions.
The other member of the big six sea-freight lines, Cosco of China, has also suspended services from Ukraine – ostensibly on safety grounds.
Over the last week, much has been made of Western companies announcing they will wind down their Russian interests.
With almost 150m consumers, and an unmatched natural resource endowment, Russia has attracted serious foreign investment since the Soviet Union collapsed.
BP owns a fifth of Russia’s largest oil company Rosneft, while Shell co-financed the Nord Stream gas pipeline to Germany and has a massive stake in the Sakhalin-II oil and gas project in Russia’s far east. Industrial thoroughbreds such as Ford, Boeing, VW and Siemens have extensive Russian operations.
Media and tech giants like Warner Bros, Disney and Sony, Apple and Dell have also forged deep Russian links.
All these large corporates have either suspended their Russian operations or pledged to sell off stakes – and shouted loudly about doing so, given the reputational damage, while war in Ukraine rages, of being connected to Putin’s Russia.
Yet I’d say the little-noticed freight-shipping moratorium is of far more economic significance, given the huge amount of bulk commodities Russia supplies to the world – not just food, but industrial metals like titanium, palladium, copper and nickel, vital for car-making, semi-conductor manufacture and other basic industrial processes.
The shipping giants are like commercial red blood corpuscles, carrying the oxygen-equivalent goods that allow the vital organs of the global economy to function.
The inability of Western firms to ship consumer goods to Russia will hurt, depriving them of what has become one of the world’s most lucrative markets. Of far more significance will be the inflation generated by the lack of commodity and raw material exports from Russia – not just energy, but food and metals.
Consider also that fertiliser is made using natural gas and potash – with Russia and its ally Belarus accounting for two fifths of the world’s potash exports. That explains why fertiliser prices are soaring across the Western world. And the resulting rise in cultivation costs will, inevitably, drive up food prices too.
Much has been made of the extent of the Western world’s sanctions – and rightly so. To see the likes of the US and UK joined by Switzerland and Japan in effectively declaring economic war on Russia is jaw-dropping.
Preventing Moscow from using its vast reserves of dollars, euro and pounds to shore up the rouble, by effectively sanctioning Russia’s central bank, is an astonishing move.
As the currency has collapsed, losing around a third of its value against the dollar since Putin’s invasion, the rouble-denominated savings of millions of middle-class Russians have been seriously dented – undermining support for the Kremlin.
This rise in fuel and food prices across the world “will hit the poor hardest”, the World Bank said last week. Hundreds of millions of poor households in food-importing nations across the developing world, thousands of miles from Ukraine, will certainly be hit hard by this conflict.
But millions of British households will too. Yes, Putin’s aggression must be countered, and the UK is rightly doing its bit to attempt to isolate the Russian economy and pressure the Kremlin.
But as fuel and food prices and utility bills skyrocket, there will undoubtedly be an impact – political and economic – here at home.
