WHAT THE RUSSIAUKRAINE WAR MEANS FOR SUPPLY CHAIN
On 24 February 2022 Russia invaded neighbouring Ukraine, creating further uncertainty and challenges for the global supply chain.
Peter Jones, Founder and Director of Prological, discusses how the Russia-Ukraine conflict is affecting global supply chain pressures with respect to energy, air freight, battery production – and more.
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s if the global pandemic and trade battles between great powers hadn’t done enough to throw global supply chains into a spin, on 24 February 2022 Russia invaded neighbouring Ukraine which – aside from the immense humanitarian catastrophe that has ensued – added yet another set of complications to the international logistics environment. As Peter Jones, Founder and Director of Prological, explains, the RussiaUkraine conflict has knock-on effects that will be felt throughout the world.
ENERGY “Russia is the second largest oil producer in the world (~12%), and they are also Europe’s single largest gas supplier,” Peter says. “From that perspective, the sanctions against Russia mean that supply is taken away 50 | MHD MAY 2022
from the rest of the globe. Germany is the is very dependant on Russia for gas (55 per cent comes from Russia) and oil (34 per cent). Robert Habeck, Germany’s Federal Minister for Economic Affairs and Climate Action is scouring the world for alternative supply, but this is neither easy nor quick. Therefore, there has been – and will be for some time – a dramatic increase in energy costs which we will feel in Australia as the impact on German imports increases” Peter notes that even when formal hostilities come to an end, there is unlikely to be a quick reversion to the status quo ante – and that Russia will probably continue to be isolated by the international community through sanctions mechanisms. “The flow on effect in energy pricing is easy to understand, simply because global energy demand now far outstrips
supply as a result of removing Russian supply out of the global chain,” he says. “Supply chain is one of the world’s biggest consumers of energy – so that has an effect on all things supply chain, and that feeds through to consumer prices.”
GLOBAL SHIPPING & SEAFARERS In terms of global shipping, at first blush it might seem the RussiaUkraine conflict will not have a significant impact. “Russia occupies a bit less than 1.5 per cent of global shipping activity,” Peter says. “And Ukraine’s combined sea based imports and exports amount to 0.4 per cent. So, at that level, their influence over global shipping is not very significant.” But these numbers do not
