Russia’s war has major consequences

“The direct consequences of the war in Ukraine are that crew changes for Russian and Ukrainian sailors are demanding. The same applies to the payment of salaries to Russian and Ukrainian seafarers. About 2,000 Russian and 1,200 Ukrainian seafarers are associated with our members in the Norwegian-controlled fleet. We see that seafarers are the innocent third party in this conflict, and we are therefore concerned with facilitating a good and safe working environment on board, safe travel to and from the ships, and ensuring that salary earned in service is paid. Affected shipowners are doing their utmost to take care of both Ukrainian and Russian seafarers on board,” says CEO of the Norwegian Shipowners’ Association, Harald Solberg.

Other consequences of the war are related to sanctions intended to impact the Putin regime. The exclusion of Russian banks from SWIFT in particular puts an effective stop to collaboration, and this also applies to trade that in principle is not covered by sanctions at present.

“We support strict sanctions against the Putin regime’s attacks on Ukraine, and we advise our members to follow the directives, advice and recommendations coming from the Norwegian and international authorities at all times. The sanctions are developing rapidly, and we are prepared to adapt to new restrictions in the sanctions regime,” says Solberg. Prior to the war, the Norwegian controlled foreign- going fleet made about 150 port calls a year to Ukraine and about 1,300 to Russia. “We now expect that the security situation in the northern Black Sea will lead to a sharp reduction in calls in Ukraine, and the sanctions in general – in particular against Russian banks – will lead to a sharp reduction in trade with Russia.”

Europe and Western countries must prepare for higher prices for a wide range of goods. Russia and Ukraine are major exporters of such important products as oil, gas, grain, steel and selected minerals. These shipments will eventually have to be replaced by other suppliers if the situation persists. In the short term there will be a shortage of goods that will lead to higher prices, and in some areas also a shortage of deliveries. Russia is also an important supplier of essential commodities for shipping itself; both fuel (heavy oil) and other oil products will have to be replaced by other suppliers. “We expect that Norway will immediately step up its emergency preparedness work to find alternative supply lines for goods that will not be available as imports from Russia to Europe,” says Solberg.

Several shipowners, both in Europe and Norway, have now decided not to carry new cargo to and from Russia. This will most likely increase as the conflict progresses. This is perceived as a moral issue, but is also related to counterparty risk on the Russian side, as well as the fact that it will become increasingly difficult to unload the cargo in other ports, as ports in Europe are now unilaterally deciding to refuse Russian cargo.

“In our opinion, it is very important that sanctions are determined by governments to the degree possible, and that we avoid a development in the direction of companies themselves being forced to take action outside the authorities’ decisions,” says Solberg.