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Ireland 'engaging' with EU on proposal to ban Russian ships from docking at European ports

Russian trade is facing severe disruption as a consequence of sanctions announced this week.

Image: Alamy Stock Photo

THE DEPARTMENT OF Transport is engaging with the European Commission on a proposal to ban Russian ships from docking at European ports, according to an Irish Government source, as the global economy braces for blowback from the wave of unprecedented sanctions that have roiled the Russian economy over the past week.

The European Union, the United States and the United Kingdom have rolled out a range of tough measures in response to Russia’s invasion of Ukraine including closing airspace, freezing assets and excluding seven banks from the SWIFT interbank messaging network.

The UK has also advised its ports to refuse Russian commercial ships looking to dock.

Europe could follow suit with an outright ban on Russian vessels after the EU Parliament on Tuesday voted in favour of a non-binding resolution on the measure.

The Irish Department of Transport is now “engaging” with the European Commission, which is drawing up a formal proposal to member states.

However, there is understood to be some division between EU countries on the measure with Cyprus and Greece — both of which have large shipping industries — unhappy with the proposal.

Russian trade is facing severe disruption as a consequence of sanctions announced this week.

In a remarkable move, Maersk and MSC — two of the world’s biggest shipping lines — announced plans this week to suspend all freight services to and from the country; an unprecedented decision in relation to a country of Russia’s size and status within the global economic order in recent history.

Both companies announced that they will not be taking any new bookings to or from Russia, except for food, medical and humanitarian supplies. 

Maersk’s and MSC’s decisions follow similar announcements by Germany’s Hapag-Lloyd and Singaporean company Ocean Freight Express.

Combined, those four companies represent about half of global cargo shipping capacity, Bloomberg reported this week

Logistics and transport companies in Ireland and across the world are preparing for more disruption as a consequence of Russia’s isolation from global markets by Western governments and companies.

In an update to its customers, UK supply chain consulting company Woodland Group — which has a footprint in Ireland — has warned that the moves by shipping companies and governments are likely to further strain global supply chains, which have yet to fully recover from the pandemic.

Airfreight, in particular, is likely to be put under pressure.

“Beyond the impact on direct flights, the restrictions in Russian and Ukrainian airspace have caused diversions in flights between Asia and Europe, with flight times between London and New Delhi increasing by 8% compared to the same route prior to the conflict,” according to Woodland.

“The lengthening of flight times will, in turn, create a domino effect within the supply chain, with backlogs and storage challenges becoming key concerns.”

Major European companies are also feeling the pinch.

“The situation is having a big impact on production lines too, with automotive firms such as Volkswagen and BMW slowing production across their European manufacturing hubs due to a delay in crucial parts which would have originated in either Ukraine or Russia,” according to the Woodland update.

The two countries are important sources of many metals used in the car building process, with parts such as catalytic converters being made of palladium and platinum which are just two of the metals heavily sourced in the region. Further to catalytic converters, the manufacture of semiconductors also uses palladium, in addition to xenon and neon.

But economists believe the Irish economy is well-insulated from most of the trade blowback.

While Russia is a large economy, it only represents about 2% of global output, KBC Bank Chief Economist Austin Hughes told The Journal.

“So while [the sanctions] are different from anything we’ve seen in the past, at the same it’s not an economy that is pivotal to the global economy in terms of volumes,” he said.

However, Russia does have an outsized influence in certain markets, Hughes explained.

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He said, “You’re talking about the Russian economy representing about 2% global output but 12% of net energy supply.

“So it’s a small fry in terms of global economic muscle, but a big fish in terms of global energy.” 

Financial system

Russia’s financial system and its currency, the rouble, have also been put under severe pressure by Western governments.

The rouble has hovered to record lows this week after America and Europe moved to cut off the Russian central bank’s access to its store of foreign reserves — valued at about $630 billion.

Amid reports of Russian citizens queuing at ATMs to withdraw their cash, the Bank of Russia announced a range of unprecedented capital controls this week, aimed at preventing bank runs.

Asked whether the turmoil within the Russian financial system could spread elsewhere, Hughes said it was difficult to say.

“The issue is —as we found out during the pandemic and the 2008 financial crisis — we don’t really have a blueprint that tells us exactly where all the linkages within the global financial system are, and how strong they are,” he said.

“So I think that’s the problem. There’s the unpredictability of knowing who’s connected to who and what fund is connected to what fund.”

— Additional reporting by Christina Finn and – © AFP 2022

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