Russian ships have been banned from UK ports. The ban includes any vessels owned or operated by anyone connected to Russia and authorities will also gain new powers to detain Russian vessels. In the short-term, at least, it will be far from straightforward to work out which vessels are owned and operated by firms with Russian interests.
For ship owners transporting goods to Russia, technical problems are emerging. Ship owners’ insurers may now no longer be able to offer the normal guarantees that port owners often require in the instance of damage to ports by ships. Insurers may not be able to transfer payouts to ports, particularly if they are part state-owned, due to sanctions. This may lead to vessel arrests.
Shipping companies are also considering the long-term viability of their crews. Out of two million crew worldwide, approximately 200,000 are Russian and 75,000 are Ukrainian. Many Ukrainian crew are leaving to be with their families and to fight in Ukraine. As many of these crew members hold the rank of officer, with responsibilities for navigation and supervision of the safe operation of ships, their absence will prove challenging for the industry.
The conflict is leading to the displacement of ships into different parts of the world to avoid the conflict and transport alternative sources of commodities supplied by Russia and Ukraine. Unlike during the Ever Given blockage in 2021, supply chains are unlikely to be halted, but deliveries will be slowed.
In the longer term, a protracted conflict in Ukraine could have a profound effect on the commodity markets. As Russia and Ukraine produce 29% of the world’s wheat supply, 19% of corn, and 80% of sunflower oil exports, there is a potential for food stability issues for countries, including in Africa and the Middle East, which rely on imports of these commodities.
Furthermore, Ukraine supplies a large proportion of neon gas used in the production of semiconductors and is also a significant producer of uranium, titanium, iron ore, steel, nickel, copper, palladium, platinum, and vanadium.
Marsh recommends that insureds continue dialogue with their broker and trading partners, as the situation is fluid.
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