Aurelia Butler

The world’s two largest container shipping groups MSC and Maersk suspended cargo bookings to and from Russia on Tuesday as sanctions unleashed a renewed wave of disruption for strained global supply chains.The suspension, which excluded food and medicines, followed similar moves by rival groups Ocean Network Express and Hapag-Lloyd as the container companies sought to avoid the risk of carrying cargo placed under western sanctions.Maersk said sanctions on Russia were starting to have an impact on trade, causing delays and leading to the detention of cargo by customs authorities.This is likely to create further supply bottlenecks as ports across the world remain severely clogged because of an unexpected rebound in demand for goods during coronavirus lockdowns.On Monday, the UK banned the entry of all Russian vessels to its ports.“It’s making a tough time for global logistics even worse now,” said Peter Sand, an analyst at Xeneta, an Oslo-based shipping research group.

The disruption has also spread to the air cargo market, where industry executives expect prices to rise as aircraft are forced to reroute.An already existing shortage of planes is likely to be worsened by the loss of Russian and Ukrainian specialist cargo aircraft for large goods.“If they are sidelined now, you are taking some real capacity out of the market. We will in all likelihood begin to see rates [to transport goods] rise,” said Neel Jones Shah, global head of air freight at brokerage Flexport. Russian and European airlines are nearly completely banned from each other’s skies, complicating flight paths for planes delivering goods and materials from Asia to Europe. The shipping industry also faces further problems because of difficulties switching Russian and Ukrainian crews that supply 14.5 per cent of the world’s seafarers, according to the International Chamber of Shipping.Last week, Russia halted commercial shipping in the Sea of Azov, while Ukraine ceased operations at all of its ports, including those on the Black Sea on its southern coast. The invasion of Ukraine has also led insurers to quote additional premiums equivalent to hundreds of thousands of dollars to cover ships travelling to the Black Sea against getting caught in the crossfire. Three non-military ships have been struck by missiles since the conflict began.Elsewhere, the suspension of shipping services is pushing up prices for several industrial metals.Aluminium, used in electric vehicles and aeroplanes, rose 1.8 per cent to a record high of $3,457 a tonne on Tuesday. Russia accounts for about 6 per cent of global aluminium supply.In addition, freight rates for oil tankers have surged as traders bet that more crude will be exported out of west Africa, the Middle East and the US to replace Russian supplies. Svein Moxnes Harfjeld, co-chief executive of DHT Holdings, a tanker company, said rates for supertankers running between the Middle East and Asia — one of the most used routes — have more than doubled to $25,000-$35,000 a day in the past week. More

By David LawderWASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen must block Russia from exchanging the $17 billion in International Monetary Fund reserves it received last year and oppose any further such IMF allocations, U.S. Republican lawmakers said.The 41 lawmakers said in a letter to Yellen that the $650 billion allocation of Special Drawing Rights to IMF members that she backed was a mistake that had undermined sanctions on Russia even before it invaded Ukraine. “The hostile invasion of Ukraine this week demonstrates why the IMF should never have approved its latest $650 billion general allocation of SDRs in August 2021,” the lawmakers said in the letter dated Feb. 28.All IMF members received SDRs – backed by dollars, euros, yen, sterling and yuan – in proportion to their shareholding in the Fund in the distribution aimed at helping poorer countries fight the COVID-19 pandemic. But to spend the $17 billion in SDRs it received, Russia would need to find a partner country willing to exchange them for the underlying currencies in the form of an interest-bearing loan. The United States and Western allies have imposed sanctions on Russia’s central bank aimed at neutralizing Moscow’s $640 billion reserves, which would make such a transaction difficult and subject the counterparty to sanctions as well. But the lawmakers used the invasion to repeat their longstanding criticism of the SDR allocation, which also provided SDRs to China and Iran. They said Yellen should press IMF members to formally agree not to exchange Russia’s SDRs, and should oppose further allocations because they would grant more assets to Moscow.”We cannot allow these reserve assets to help the regime withstand the latest sanctions announced by the President, let alone offer additional billions through further allocations,” wrote the lawmakers, led by Representative French Hill of Arkansas and Senator Bill Hagerty of Tennessee.The lawmakers also said that Yellen and U.S. allies must plan for contingencies to block a bailout if an economically weakened Russia is forced to turn to the IMF for future loans.”As the largest shareholder of the IMF, the United States has a responsibility to ensure that the Fund is not misused to support Russia’s warmongering in Ukraine,” the lawmakers wrote.A U.S. Treasury spokesperson could not immediately be reached for comment. More

Total trade between China and Russia jumped 35.9% last year to a record $146.9 billion, according to Chinese customs data, with Russia serving as a major source of oil, gas, coal and agriculture commodities, running a trade surplus with China. Since sanctions were imposed in 2014 after Russia annexed Ukraine’s Crimea, bilateral trade has expanded by more than 50% and China has become Russia’s biggest export destination. A related graphic: China’s trade with Russia: https://graphics.reuters.com/UKRAINE-CRISIS/xmvjoerqapr/chart.png The two were aiming to boost total trade to $200 billion by 2024, but according to a new target unveiled last month during Russian President Vladimir Putin’s visit to Beijing for the Winter Olympics, the two sides want bilateral trade to grow to $250 billion.As sanctions against Russia mount, China could offset some of its neighbour’s pain by buying more, but would also be wary of running foul itself of potential sanctions.Below are key areas of trade cooperation between China and Russia. OIL AND GAS Exports of Russian oil and gas to China have steadily increased. Russia is China’s second-biggest oil supplier after Saudi Arabia, with volumes averaging 1.59 million barrels per day last year, or 15.5% of Chinese imports. About 40% of supplies flow via the 4,070-km (2,540-mile) East Siberia Pacific Ocean (ESPO) pipeline that was financed by $50 billion in Chinese loans.Russia is also Beijing’s No. 3 gas supplier, exporting 16.5 billion cubic metres (bcm) of the fuel to China in 2021, meeting about 5% of Chinese demand. Supplies via the Power of Siberia pipeline, which is not connected to the network of westbound Russian gas pipelines, began in late 2019 and are due to rise to 38 bcm a year by 2025, up from 10.5 bcm in 2021, under a 30-year contract worth more than $400 billion. Russia aims to build a second gas pipeline, Power of Siberia 2, with capacity for 50 bcm a year to run via Mongolia to China.Russia was also China’s No. 2 coal supplier in 2021. Last month, Putin unveiled new Russian oil and gas deals with China worth an estimated $117.5 billion.FOOD TRADE Russia’s food trade with China is small but expanding.In 2019, China allowed the import of soybeans from all regions of Russia, and the two countries signed a deal to deepen cooperation in soybean supply chains, which saw more Chinese firms growing the beans in Russia.Soybean exports to China stood at 543,058 tonnes last year and are expected to reach 3.7 million tonnes by 2024.In 2021, China approved beef imports from Russia, while last Friday, it allowed imports of wheat from all regions of Russia. Other food exports from Russia to China include fish, sunflower oil, rapeseed oil, poultry, wheat flour and chocolate. China is also a huge buyer of timber from Russia’s Far East, with imports of timber and related products worth $4.1 billion last year. In the other direction, China sells mechanical products, machinery and transport equipment, mobile phones, cars and consumer products to Russia. Chinese exports to Russia stood at $67.6 billion last year, up 34%. INVESTMENT Western sanctions have forced Russia to look toward China for investment opportunities in recent years, and Chinese state banks have helped Russia finance everything from infrastructure to oil and gas projects under China’s Belt and Road Initiative. Russia is by far Beijing’s largest recipient of state sector financing, securing 107 loans and export credits worth $125 billion from Chinese state institutions between 2000 and 2017, data from the College of William and Mary’s AidData research lab showed. China and Russia began using their own currencies to settle bilateral trade in 2010 and opened their first currency swap line in 2014, which they renewed in 2020 for 150 billion yuan over three years. Yuan settlements accounted for 28% of Chinese exports to Russia in the first half of 2021, compared with just 2% in 2013, as both countries seek to ease reliance on the dollar while developing their own respective cross-border payment systems.The Chinese currency accounted for 13.1% of the Russian central bank’s foreign currency reserves in June 2021, compared with just 0.1% in June 2017, with Moscow’s dollar holdings dropping to 16.4% from 46.3% in the same period. More

Russia’s huge sovereign wealth fund will also be pressed into action, spending up to 1 trillion roubles ($10.3 billion) to buy shares in Russian companies, a government decree showed, confirming an earlier report by Reuters. “In the current sanction situation foreign entrepreneurs are forced to be guided, not by economic factors, but to make decisions under political pressure,” Prime Minister Mikhail Mishustin told a governmental meeting.”In order to give business a chance to make a considered decision, a presidential order was prepared to impose temporary curbs on exit from Russian assets,” he said, without giving details. Russian authorities are hurrying to respond to increasingly harsh sanctions imposed by Western nations since Moscow invaded Ukraine last Thursday.The measures range from curbs on the central bank’s ability to use its gold and foreign exchange reserves to the exclusion of big Russian banks from the international financial system. On Monday, a plunge in the rouble to all-time lows forced the central bank to hike its key interest rate to 20% and ask exporting companies to sell forex to support the currency.Global companies which have operated in Russia for decades have said they will halt investments, including BP (NYSE:BP) and Shell (LON:RDSa), shareholders respectively in Russia’s top energy company Rosneft and Sakhalin 2 LNG plant.Mishustin said Russia was “open to dialogue with constructively-minded investors” and that: “We expect that whose who invested into our country will be able to work here further on.” On Tuesday, Connecticut Treasurer Shawn Wooden said he would direct the U.S. state’s pension funds to sell Russian assets, for moral reasons and to reduce investment risk in the state retirement funds, worth more than $47 billion in all.Russia calls its actions in Ukraine a “special operation” designed not to occupy territory but to destroy its southern neighbour’s military capabilities and capture what it regards as dangerous nationalists.The Institute of International Finance (IIF), a trade group representing large banks, has warned that Russia is extremely likely to default on its external debts.With Moscow’s battered stock market closed for a second day on Tuesday, Russian billionaire Mikhail Fridman, who has been sanctioned by the European Union, warned that exiting Russian assets might prove difficult even without the temporary ban.”I don’t think we would be able to divest assets in Russia right now because there are no buyers for the time being,” Fridman told reporters in London. More