Microfocus
  • Home
  • Business Economics
  • Business Education‎
  • Business Ideas
  • Business Law‎
  • Business Ownership‎
  • Business News
Select Page

Battered but not broken – Moneyweb

Mar 19, 2022

Battered but not broken


Russia’s first McDonald’s store in opened in 1990, just months after the fall of the Berlin Wall. It was a potent symbol that the Cold War was ending and a great ideological wound healing.

Now every McDonald’s in Russia is closed, as nations and corporations reduce, suspend or sever ties in response to the invasion of Ukraine.

The scale of economic sanctions imposed on Russia are unprecedented. It has been suggested this conflict could be remaking the world order, with Russia choosing territorial hegemony over global trade. As Craig Fuller, the chief executive of supply-chain information service Freightwaves, has put it:

Related Posts:

  • Russia-Ukraine war LIVE: EU sanctions Putin's spokesman, oligarchs, scribes

If the Russia-Ukraine conflict’s international ramifications keep spreading, we face a real possibility of a bifurcating global economy, in which geopolitical alliances, energy and food flows, currency systems and trade lanes could split.

This is likely to be an exaggeration. Nonetheless shock waves are spreading through already battered supply chains. In this article I’m going to focus on three elements – energy, food and trade lanes.

Energy exports still flowing

Fears over Russia’s huge fossil fuels export being interrupted has led to global oil and gas prices spiking. Oil tanker freight rates have tripled as ship owners weigh the risk of being stuck with cargo they can’t offload.

So far, though, there has been no significant disruption to Russia’s exports. The US and UK (and Australia) are banning all imports of Russian oil, but these are not significant markets (and the UK timeline to end imports is by the end of 2022).

More important is what European Union nations do, given their high dependence on both Russian oil and gas. So far the EU has imposed financial sanctions on Russian energy producers while still buying their product.

Moving away from Russian oil is not easy. Russia has a 12% global share, and global refineries are fine-tunned to work with specific types of oil found in specific regions. Where possible, reducing production to change the oil mix that goes in takes weeks and require changes in equipment. Severing ties with Russian oil may not be an option in the short-term.

Replacing Russian gas is even more challenging. The European Union takes more than 40% of its gas imports from Russia. Pipelines like Nord Stream, connecting Russia to Germany, are unmatched. Sea transportation is limited. If oil tankers are oversized tin cans, LNG carriers are super-cooled cryogenic tanks that keep the gas liquefied at minus 160℃ degrees (-260℉). There are few players in this game, with the volume of gas transported globally about 0.1% that of oil.

Food supplies

In 2020 Russia and Ukraine accounted for 25.6% of global wheat exports (Russia 17.6%, Ukraine 8%), 23.9% of global barley exports (Russia 12.1%, Ukraine 11.8%) and 14% of global corn exports (Ukraine 13.2%, Russia 1.1%).

With higher energy prices also driving up food prices, the United Nations’ Food and Agriculture Organization has raised the alarm overfood security in Africa and the Middle East.

Ukraine’s exports have all but stopped. No one knows for sure how much its next harvest will be affected. Fertilisers, pesticides and fuel are scarce. Men are being summoned to join the fight. Farm supplies are redirected to besieged cities and to the army. The remaining trade routes to the west are threatened.


Ukraine average wheat production by region, 2016-2020.
Ukraine average wheat production by region, 2016-2020.
Foreign Agricultural Service, US Department of Agriculture, CC BY

Russia has temporarily banned grain exports to its former Soviet Union neighbours. Along with these self-imposed restrictions, its Ministry of Industry and Trade has also “recommended” halting fertiliser exports.

Russia is the world’s biggest producer of ammonium nitrate, accounting for about a third of global exports. This will have knock-on effects for other major grain exporters such as Brazil, which imports about 85% of its fertilisers, mostly from Russia.

Trade lanes

The 27 nations of the European Union, the United States and Canada have closed their airspace to Russian planes. Russia in return has closed its airspace to 36 nations. This has consequences for transport costs.

Going around Russia, the largest country in the world with 11% of its land mass, is not trivial if you are flying from Asia to Europe. The cargo division of Germany’s flag carrier Lufthansa estimates doing so will reduce its airfreight capacity by about 10%. FedEx has added a war surcharge.

Air routes for FedEx, UPS, DHL, Cargolux and subnetworks.
Alessandro Bombelli et al, Analysis of the Air Cargo Transport Network using a Complex Network Theory Perspective, CC BY

The war also has consequences for China’s new “Silk Road” to Europe, the world’s longest freight rail line, on which the nation has spent US$900 billion.

While China’s exports by rail are still tiny compared to shipping, they have been growing quickly. Rail routes helped alleviate the pressure on Chinese ports during the pandemic. These pressures have been building again with COVID outbreaks and hard lockdowns in port cities such as Tianjin, Shenzhen and Shanghai (the world’s largest port).

The main route from China to Europe goes through through Russia and Belarus. There is an alternative route to Turkey through Azerbaijan, Georgia and Kazakhstan but this is less established. China can also, of course, continue to use container ships. But a key geostrategic goal of its Belt and Road initiative is to secure trade routes safe from the US navy. This may dampen China’s enthusiasm for an extended conflict between Russia and the NATO nations.

The New Silk Road land route between China and Europe takes on average about 16 days, compared with 36 days for the usual sea route.
The New Silk Road land route between China and Europe takes on average about 16 days, compared with 36 days for the usual sea route.
Wikimedia Commons, CC BY

The Russian invasion is a tragedy for the Ukrainian people, a challenge to European democracies, and a strong head wind to economic recovery everywhere. A potentially long conflict may be ahead of us. It is reshaping global supply chains, but for how long and by how much remains to be seen.The Conversation

Flavio Macau, Associate Dean Teaching & Learning, Edith Cowan University

This article is republished from The Conversation under a Creative Commons license. Read the original article.



Source link

Recent Posts

  • SAP and Cloudflare under fire for Russia presence
  • Securing the UK public sector in the era of hybrid working
  • Data theft group might be ‘frustrated’ white hat hackers
  • Microsoft reveals Power Platform low code upgrades
  • Fears over tight supply keep crude oil futures elevated

Categories

  • Business
  • Business Economics
  • Business Education‎
  • Business Ideas
  • Business Law‎
  • Business News
  • Business Ownership‎
  • General
  • health
  • Medical
  • Real estate

Trails Js

Management Certificate Online Washington Tech

Partner Links

Intellifluence Trusted Blogger

BL

linkspanel

textlinks

Visit Now

car show

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
May 2022
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031  
« Apr    
  • Advertise Here
  • Contact Us
  • Privacy Policy
  • Sitemap
  • Home

Tags

Amazon Business Login Atos Best Business Schools Business Business Bank Account Business Card Maker Business Cards Near Me Business Card Template Business Casual Attire Business Casual Shoes Business Casual Woman Business Plan Examples Ca Business Search Centre Chase Business Credit Cards Chase Business Customer Service Chase Business Login Chase Business Phone Number Cheap Business Cards Citizens Business Bank COVID19 Cox Business Login Digital Business Card Free Business Cards Google Business Login information Innovation Lands End Business Massage Parlor Business Near Me Michigan Business Entity Search Mind Your Business Ohio Business Search Research Risky Business Costume Small Business Loan Small Business Saturday 2021 Starting A Business Texas Business Entity Search Triumph Business Capital Vending Machine Business Verizon Business Customer Service Vonage Business Login Wells Fargo Business Account Yahoo Small Business Yahoo Small Business Login
  • Facebook
  • Twitter
  • Instagram
  • RSS
microfocus-x-ray.com 2020