United States:
How The Russian Invasion Of Ukraine Is Affecting Logistics And Supply Chains
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The invasion of Ukraine by Russian forces in late February
spurred a flurry of coordinated sanctions worldwide, intended on
pressuring the government of Russia to withdraw. However, in
addition to creating economic pressure within the Russian
Federation, the targeted sanctions programs and enhanced export
controls are creating additional challenges to trade flows.
Logistics firms are making hard choices about their current
operations, and in many cases are creating additional pressures on
already taxed supply chains.
Closing of airspace makes flights longer: not just for Russian
aircraft but for flights originating in the West as well. Recently
an Air Bridge Cargo flight had to divert to Moscow after flight
controllers refused to clear the aircraft into EU airspace.
Additionally, western cargo carriers may experience longer flight
times and inconvenient routing as most polar routes to and from
Asia will not be able to enter Russian controlled airspace. The
longer sub-polar routes will increase the need for refueling stops,
meaning possession of a landing slot at Anchorage, Alaska just
became quite valuable. Air cargo is not alone in the re-routing
situation, as express consignment operations have also been
disrupted. While DHL is suspending service to Ukraine citing
airspace safety issues, FedEx and UPS have both announced the
suspension of services to both Russia and Ukraine.
Sanctions listings often lead companies to reconsider the
reputational risk of continuing direct trade, even if sanctions
would not specifically prohibit it. In normal times, Asia-located
freight too bulky for air cargo, but too time sensitive for sea,
could be routed via rail from Beijing through Russia to European
railheads. However, cargo operators like Flexport have stopped
booking on the China to Europe Trans-Siberian railroad service.
While Russian Railroads does find itself on the list of
“crucial major Russian enterprises” which subject them to
restrictions on “all transactions in, provision of financing
for, and other dealings in new debt … and new equity,” the
sanctions do not prevent use of the railroad.
Logistics managers and compliance teams need to factor in
potential costs in dollars and time, along with making hard
decisions about the risk of continuing business relationships due
to the conflict and the increasing imposition of trade sanctions by
western nations.
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