Sanctions against Russia cause panic of obstruction in supply chain of global economy

There is rising panic in Europe that the sanctions imposed on Russia over the invasion of Ukraine may cause stronger obstruction in the supply chain of the global economy more than the coronavirus pandemic. Many manufacturers and producers in Europe are fretting that their source of production materials is being affected and cut off by the sanctions on Russia. While many investors are moving out of Russia and Ukraine to other eastern European countries, they still expressed concerns over imports from Russia.

These growing fears dominated discussions at a logistics expo in London. The Russia invasion of Ukraine has displaced global focus on recovery and kick-starting economies in the post-coronavirus pandemic era.

In eight days of Russia’s military operations in Ukraine, several companies had been compelled to shut down and quit Ukraine and Russia in response to a plethora of economic and financial sanctions imposed by European countries and America.

The sanctions are perceived to be causing more disruptions in the world supply chain than the conflict in Ukraine, threatening recovery from the lockdown regime.

At the Retail Supply Chain and Logistics Expo at the ExCeL conference in London, Dan Smith-Cox, a business development director at Zencargo, had said: “We have seen a few manufacturers pull into eastern Europe from Ukraine and Russia as opposed to China.

“A lot of production is moving to Turkey.”

Another participant working in the metal cutting sector, also stated that they were buying raw materials from Poland, Russia, Germany and Ukraine. He expressed a phobia that tougher times await manufacturers, observing that supply chains of many producers are obstructed by the sanctions.

He declared that “The invasion is going to be much more difficult than the lockdowns.”

According to Ratings agency Moody, Russia’s invasion of Ukraine is “the greatest risk” facing supply chains since the pandemic, insisting that the conflict is already having an effect on many economies in Europe.

Three largest shipowners in the world, MSC, Maersk and CMA CGM, beside others, declared last Tuesday that they are suspending services to Russian ports, from Saint Petersburg on the Baltic to Vladivostok in the Pacific.

The shipping companies sorted out new routes in haste, which precipitated an increase in shipping freights because of longer journeys on the new routes.

Oil prices are also rising high since the war in Ukraine. Brent North Sea crude rose to $120 per barrel and gas prices also hit record highs.

The obstruction of supply chain as a result of the sanctions has devastating effects on European markets, as the cost of industrial metals rises so high, and aluminium price recorded an unprecedented high-rate last Friday.

The Executive Director at Scala, a supply chain consultancy, Dave Howorth, observed that the supply chain crisis would be “product-specific” rather than general as in the pandemic.

Considering the energy and commodities prices, semiconductors were noted to already be in global shortage threatening prices going up.

It was noted that Ukraine provides more than 90 percent of semiconductor-grade neon exported to the United States.

Mike Hawes, head of UK industry body the Society of Motor Manufacturers and Traders, also disclosed that Russia and Ukraine produced key raw materials such as aluminium and neon used in semiconductor manufacturing and are part of the European automotive supply.

Ukraine and Russia supplied about 23 percent of wheat in global trade in 2021-2022. The two countries are also the highest producers of sunflower oil production, producing 60 percent of global stock.

Experts worry that “The food supply chain, specifically wheat and grains, will be impacted.” It will apparently impair agricultural production and distribution chains.