On Monday, February 21, 2022, the White House announced the first tranche of sanctions on Russia as conflict over two eastern Ukrainian regions escalated.
With support from partner countries in the European Union, United Kingdom, Canada, Japan, and Australia; the United States President Biden has directed the following measures:
- Full blocking sanctions on two significant Russian financial institutions. These measures will freeze Russian assets in the United States, prohibit U.S. individuals and businesses from doing any transactions with them, shut them out of the global financial system, and foreclose access to the U.S. dollar.
- Expanded sovereign debt prohibitions restricting U.S. individuals and firms from participation in secondary markets for new debt issued by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. These prohibitions will cut off the Russian government from a key avenue by which it raises capital to fund its priorities and will increase future financing costs. Denies Russia access to key U.S. markets and investors.
- Full blocking sanctions on five Russian elites and their family members. These individuals and their relatives directly benefit from their connections with the Kremlin. Other Russian elites and their family members are on notice that additional actions could be taken against them.
- Any institution in the financial services sector of the Russian Federation economy is a target for further sanctions. Over 80% of Russia’s daily foreign exchange transactions globally are in U.S. dollars and roughly half of Russia’s international trade is conducted in dollars.
Additionally, the White House confirmed operations on Russia’s Nord Stream 2 Natural Gas pipeline in Germany has stopped to prevent alternative revenues from the $11 billion investment.
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4 POTENTIAL IMPACTS TO GLOBAL SUPPLY CHAINS
- Container shipping costs may increase due to fuel prices. If legislators do not exempt the transportation industry, the transport of Russian oil would be considered sanctionable activity. For example, in 2019, COSCO charter were sanctioned for carrying Iranian oil.
- Increase in cyberattacks to U.S. infrastructure. Russia has been connected to cyberattacks on critical trade infrastructure, such as, ocean carriers, ports, terminals, and U.S. businesses directly. Maersk, the world’s largest steamship line, was targeted in 2017 with an attack that lasted about a week; meanwhile one of the largest freight forwarders in the world is recovering from a recent cyberattack that targeted their computer network over the weekend.
- Reduced capacity for commercial transportation. If military efforts escalate in Europe, governments will begin contracting domestic carriers to transport equipment and supplies, reducing the available capacity for commercial goods.
- Increased delays & congestion. Because terminals across the U.S. are already facing severe delays and congestion from over two years of COVID-related supply chain issues, any additional strain on global transportation infrastructure from fuel availability, carrier capacity, cyberattacks, diverting cargo and more could have severe long-term impact for international shippers trying to fill inventories.
U.S. shippers should begin to evaluate contingency measures for sourcing, transportation, and logistics operations. Need help? Contact Green Worldwide Shipping to speak with our Global Trade Experts at greenworldwide.com
