Russia’s war on Ukraine adds more turmoil to global shipping

This is an audio transcript of the FT News Briefing podcast episode: Russia’s war on Ukraine adds more turmoil to global shipping

Jess Smith
Good morning from the Financial Times, today is Monday, March 7th, and this is your FT News Briefing.

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The UN’s top refugee official called the exodus from Ukraine the fastest growing refugee crisis in Europe since world war two. The Biden administration has shifted position on whether to ban Russian oil and oil prices surged. And global shipping was already in chaos because of the pandemic, now there’s the war.

Harry Dempsey
Sanctions are causing massive disruption and basically shipping companies pressed pause on what they’re doing.

Jess Smith
I’m Jess Smith, in for Marc Filippino, and here’s the news you need to start your day.

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Russia’s attacks on Ukraine’s cities have sparked a massive refugee crisis. More than one and a half million people have fled the country since Russia invaded 11 days ago. That’s according to the UN High Commissioner for Refugees. About a million are in Poland. The government there has promised financial support to Poles who help refugees. Hungary and Slovakia are also taking in significant numbers, as is Moldova, one of Europe’s poorest countries. Yesterday, Moldova’s prime minister said her country is committed to helping all refugees in Ukraine but she added she would need support from the international community.

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The price of Brent crude soared yesterday to nearly $130 a barrel, it’s the highest oil has been since 2008. And the spike came after the Biden administration reversed its position on banning Russian oil imports. Washington had been resisting pressure from US lawmakers to do so, partly out of fear that a ban would push up oil prices. But on Sunday morning, US secretary of state Antony Blinken made this comment on the NBC show Meet the Press.

Antony Blinken
We are now in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course at the same time maintaining a steady global supply of oil.

Jess Smith
The FT’s Stefania Palma says behind the change position is increasing pressure from lawmakers.

Stefania Palma
So Nancy Pelosi, the Democratic speaker of the House, came out recently saying she backed a ban of this kind of sort of piling pressure on the White House. And at the same time, a bill was passed by a bipartisan group of US senators last week to ban US imports of Russian oil. Obviously, the bill would have to pass the Senate and the House and be signed by the president to become law, but it was a further signal that’s truly in Washington there’s been just an increased pressure to make this move. And with Blinken coming out and saying that the US was in very active discussions with its European partners about a co-ordinated ban on oil imports, it’s quite a change versus the kind of discussions that were happening in the last few days.

Jess Smith
And talks with European allies are significant because Europe relies on Russian energy much more than the US. That’s been a concern of the White House. But Stefania says Europe may not be completely opposed to banning Russian oil.

Stefania Palma
First of all, British officials are not ruling out a total ban on Russian oil imports, even though one person we did quote described the move as potentially drastic. On the other hand, we also have a senior French official in reaction to Blinken’s comments about further sanctions were also being examined by European and other partners. But I think it’s also worthwhile noting that Blinken also added that he wasn’t going to rule out taking action one way or the other, irrespective of what others were going to do, which I think is something that we need to keep in mind, and I also believe it’s something that the Europeans are watching closely.

Jess Smith
Stefania Palma is the FT’s legal and enforcement correspondent.

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Moscow may have thrown a wrench into US efforts to reach an agreement with Iran to bring the US back into the Iran nuclear accords. Western officials appear to be close to a deal. But this weekend, Russia’s foreign minister said Moscow wants US guarantees to ensure that sanctions on Russia over Ukraine did not damage Moscow’s ability to freely trade with Iran. And that includes military technical co-operation. Russia is a signatory to the nuclear accords and it’s been involved in negotiations aimed at saving the deal.

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Russia’s war on Ukraine is causing chaos for the global shipping industry. Last week, the world’s two largest shipping container groups, Maersk and MSC, suspended cargo bookings to and from Russia. Maersk said that sanctions were starting to have an impact on trade. Here’s the FT’s industry reporter Harry Dempsey.

Harry Dempsey
What is really disruptive for them is that they’re having checks on their cargo to check they’re not breaking sanctions in ports in the EU and in the UK. And that is really causing a sort of ripple effect across the world.

Jess Smith
Harry says shipping companies are also halting operations because of all the uncertainty.

Harry Dempsey
Sanctions are causing massive disruption and basically shipping companies pressed pause on what they’re doing because they don’t wanna send a cargo full of oil or gas, which you know, takes 10 days to get to Europe, to then find out three days within the journey that that oil for some reason would not be allowed to be discharged at the port.

Jess Smith
And he says the war has also shut down an important alternative that shippers had been using.

Harry Dempsey
One of the things which is really significant as well is the closure of airspace, so there’s been a tit-for-tat between Europe and Russia. So Russia has closed its airspace to European carriers and vice versa, and that’s a big problem for the air cargo market. So I mean, the shipping market was already super stressed from the pandemic, and so lots of importers and exporters had turned to air cargo as a sort of safety valve, and they’d also been doing that for rail, which goes from China through to Europe. Those have both been disrupted on the air cargo side. They’ve got to travel further to avoid Russian or European airspace, depending on, you know, which carrier you are. And some Japanese airlines have stopped bookings for air cargo and then the Trans-Siberian rail has effectively stopped because of the war and sanctions on Russian railways.

Jess Smith
There’s also an unexpected staffing issue. Harry says Ukraine and Russia typically provide a huge amount of seafarers to the global fleet.

Harry Dempsey
So I think one in seven from Russia or Ukraine. The Ukrainians in particular, they’re highly skilled and they work in a lot of the management roles, so they’re officers or captains. So they’re not easily replaceable. And with all the flights stopping that created a massive problem for getting seafarers on and off the ships. And so I think what we’re going to see in the coming weeks and months is a big, big disruption from that.

Jess Smith
Harry Dempsey is the FT’s industry reporter.

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Before we go, another unexpected ripple effect of the war in Ukraine is being felt in Sri Lanka. The country had been banking on tourism and exports to replenish its foreign reserves. It needs to pay off billions in foreign debt and buy energy supplies. But two of its biggest tourist markets were Russia and Ukraine. Russia is also a huge buyer of Sri Lanka’s main export: tea. The fallout from the war has increased the risk of Sri Lanka defaulting. Now, one local analyst says it’s extinguished all hope of resolving the country’s economic crisis.

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You can read more about all these stories at FT.com. If you aren’t yet a subscriber, you can still read our key Ukraine coverage for free. Just visit FT.com/freetoread. Again, that’s FT.com/freetoread. We also put a link in the show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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