Windward’s Weekly Executive Summary (March 21-26)
The recent media controversy involving a major oil and gas company shows that Russia’s “black gold” holds strong appeal, but a “business as usual” approach will likely cause backlash while the Russia-Ukraine conflict festers. After being contacted by a media outlet in relation to over $150 million in crude oil shipments, the energy company announced that it would entirely cease oil purchases from Russia by the end of 2022
Windward’s analysis of the conflict’s impact on trade and finance this week found that this organization is not alone…vessels and companies are still dealing with Russian-affiliated tankers and engaging in ship-to-ship operations. There were at least 40 ship-to-ship meetings that lasted at least three hours between Russian-affiliated oil tankers and non-Russian-affiliated vessels, a relatively normal number of meetings.
According to our proprietary data, three vessel sub-classes are experiencing increased operations in Russian ports in the Black Sea since the conflict started – general cargo, oil product tankers, and oil chemical tankers.
- Those sub-classes had a combined 44% increase in port operations compared to March 5-11
Some companies are still interested in doing business with Russia, others are being blocked from doing business by Russia. The European Union Commission president, Ursula von der Leyen, called on Putin to stop blocking hundreds of ships in the Black Sea that are filled with wheat. Windward’s data from this week shows that 53 bulk carriers in the area have been transmitting and are anchored in port for more than 5 days. Twenty-five (25) of the 53 have been anchored for more than 10 days. We can expect wheat/food prices to skyrocket if this continues…
Sanctions are Working, But…
Aligned with the consistent decrease of maritime operations in Russian ports, Windward’s data indicates there is also a decrease in the number of vessels visiting Russian territorial waters for the first time. These first-time visits have not completely disappeared, however – 22 unique vessels have entered Russian territorial waters for the first time in their operational history, following the start of the invasion.
Some of these vessels are owned or operated by companies registered in Germany, the United Kingdom and even the U.S. The volume of commercial activities in Black Sea ports is beginning to increase, with an uplift in port operations in Russia. The UK issued another round of sanctions – including Sovcomflot, Alfa Bank and a slew of others – joining fresh sanctions from the U.S. and expanding the pressure on Russia.
Meanwhile, in China…
The Shenzhen shutdown for Covid-19 saw the ports in the area take major hits:
- Yantian port saw an 84% decrease in the volume of container vessel operations initially and then fell further to 100%
- Shekou port went from a daily average of 20 port calls by container vessels, maintained steadily since November 2021, to an average of 12 after the lockdown announcement
While most Chinese ports have recovered from February’s country-wide congestion, the ports in and around Shenzhen have not, likely a result of the recent lockdown.
Media scrutiny and public pressure on multinational energy companies engaging in commerce with Russia (or its entities) will continue.
French banks, including BNP Paribas and Crédit Agricole, announced they are pulling out of Russia. As sanctions ramp up, we will see other banks and multinational companies leave Russia. Insurance companies and other members of the ecosystem will start implementing the new sanctions and incorporate them into their workflows.
Wheat trade will make headlines as food prices soar.
The combination of the expanding Russia-West tensions and the Shenzhen shutdown is accelerating a fundamental shift in supply chains. In Windward’s recent webinar, Lars Jensen, CEO and Partner of Vespucci Maritime, spoke about how normally the Russia-Ukraine conflict would not affect the global supply chain, but is making an impact on an already strained and fragile system. Recent events will likely lead companies to onshore or nearshore, expediting the transition from “just in time” to “just in case” manufacturing.