The maritime industry faces more challenges from the conflict between Russia and Ukraine
Major geopolitical issues have varying impacts on the industry. Industry observers are anticipating another bout of recession to hit European economies.
Hiked prices anticipated
The price of Brent crude reached a 7-year high of more than US$99 (£73) a barrel after President Vladimir Putin ordered troops into Ukraine. The West demonstrated it meant business in targeting Russian energy through Germany’s subsequent cancelling certification of the Nord Stream 2, a 1,230km (764-mile) natural gas pipeline under the Baltic Sea, running from Russia to Germany’s Baltic coast.
It runs parallel to an earlier Nord Stream pipeline and would double its capacity, to 110 billion m3 of gas annually. It means Gazprom (Russia’s half state-owned energy company) can send gas to Europe’s pipeline system without using existing pipelines running through Ukraine and Poland. The pipe has been filled with gas but awaiting approval by Germany and the European Commission (EU). The halt will result in another energy shortage and inflation – mainly felt by Europe.
It would therefore cost more to ship as oil prices increase, so will commodity prices from supply shortages. In the grand scheme of things, it is both good and bad for shipping. BRS brokerage however begged to differ. It said, “Russia’s oil and gas exports would be facing the heat from any sanctions, given they are the lifeblood of Russia’s economy, accounting for around 40 per cent of Russia’s revenues.” It added future sanctions from United States (US) could target Russian energy exports despite Europe’s high demand.
Andrew Jacobsen, a solicitor from Seward & Kissel remarked at a roundtable, “For the shipping industry, the biggest focus is going to be the energy sector, particularly the state-owned entities that have largely escaped major US sanctions with narrow targets that exclude shipping.” He stressed there were blocked entities listed in the Specially Designated Nationals (SDN); firms disallowed to conduct businesses with US, or involves US currency.
However, Jacobsen added a crucial point, “There are numerous Russian state-owned entities — Gazprom, Rosneft, Novatek and others that are on the sectoral sanctions identification list but not the SDN. Specific exemption for transportation were taken out. However if the Office of Foreign Assets Control (OFAC) or other regulators take the position that should you be involved in transporting oil that has been extracted in the Russian Federation, that would be viewed as sanctionable activity.”
Marine Online News Team
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