In contemplating war and its consequences, it is absolutely necessary that we scrutinise the conflict and its outcomes way beyond the battlefield. As the recent United Nations Conference on Trade and Development (UNCTAD) declared earlier this week, Russia’s ongoing hostilities are not just taking a toll on human lives and high-value infrastructure, it is also snagging trade and logistics, way beyond the theatre of the conflict. International trade, particularly, has been upended, mainly on account of global vessel demand and the consequential cost of shipping around the world.
“Maritime Trade Disrupted: The war in Ukraine and its effects on maritime trade logistics”, the UNCTAD report released on Tuesday, informs that the Ukraine’s trading partners have been compelled to look to other countries to sustain the flow of their imports. The calamitous condition of the prevailing shipping and transport regime is attributed to what UNCTAD says are disruptions in regional logistics arising from what, more or less, has been the grinding of port operations in the Ukraine to a halt, largely on account of the destruction of important infrastructure, trade restrictions, increased insurance costs, and higher fuel prices. These considerations apart, the circuitous re-routing of cargo vessels has increased shipping distances, along with transit times and costs.
On the back of the food crisis in many poor countries, mainly on account of considerations deriving from the COVID-19 pandemic, “…grains are of particular concern given the leading role of the Russian Federation and Ukraine in agrifood markets, and its nexus to food security and poverty reduction,” the UNCTAD report states. Arising out of the conflict and the destabilising of the international shipping regime, food insecure countries are faced with soaring shipping costs and consequential higher food prices.
An estimate of the extent of the destabilisation in food prices is reflected in what the UNCTAD report says has been a roughly 60 per cent rise in the cost of dry bulk goods such as grains. All of this is, in large measure, a reflection of the lopsided nature of the global balance of power insofar as global food production is concerned. Farmers worldwide depend heavily on Russia for both fuel and fertiliser – key inputs for agriculture worldwide.
It need hardly be stated that disruptions in these supplies render the dependent countries vulnerable to lower grain yields and higher prices, with serious consequences for global food security, more particularly in vulnerable and food-import-dependent economies. To these considerations should be added the fact that the Russian Federation is also a leading oil and gas exporter, which is why the UNCTAD report states that with Russia “…confronted with trade restrictions and logistical challenges, the cost of oil and gas has increased as alternative sources of supply, often at more distant locations, are called upon.” The report also states that higher energy costs have also led to higher marine bunker prices, raising shipping costs for all maritime transport sectors even further.
Contextually, it is not difficult to discern that these increased costs represent realities that go way beyond ‘numbers’. In practical terms they translate into higher prices for consumers and in some circumstances seriously threatens to widen the gap between rich and poor.
Unsurprisingly, UNCTAD is calling for urgent action to open Ukraine’s ports to international shipping so the country’s grain can reach overseas markets at lower shipping costs. Whether UNCTAD’s voice will be heard, however, above the din of what now appears to be Russia’s doubling down on its military assault on Ukraine is unclear.
While UNCTAD says that continued collaboration is needed among vessel flag states, port states, and other actors in the shipping industry “to maintain all necessary services, including bunkering supplies, health services for sailors and certification of regulatory compliance,” whether or not the global shipping sector will adhere strictly to UNCTAD’s request, is difficult to tell given the fluid nature of the situation.
The UN agency is also advocating the pursuit of alternative ways of transport, though this surely raises questions regarding the likelihood that there exists the volumes of ‘alternative’ transport necessary to respond to a crisis of this scale. While the agency’s call for more investment in transport services and trade and transit facilitation appears to be a much more practicable recommendation, it raises questions regarding the need for an immediate-term response to the crisis which is not inherent in UNCTAD’s envisaged course of action.
