Impact of the current war (Russia-Ukraine) on international logistics dynamics
International logistics activity, understood as the deployment and development of duly coordinated strategies aimed at making the distribution and transport of finished products or raw materials from one point to another viable, is beginning to undergo significant changes as a result of the current armed conflict between Russia and Ukraine.
Although some experts in the logistics area argue that Ukraine's geographical position (Eastern Europe) does not strictly speaking generate a serious crisis at the global supply chain level, they claim that the increase in raw materials (fossil fuels) due to the conflict does, in fact, trigger an increase in transport costs, which inevitably leads to an increase in transport costs. For example, the increase in the price of fuel is a chain that goes from hindering production, distribution and sales processes, to the repercussions of the prices paid by transporters, which have an impact on those customers who require the service of transporting goods.
Other approaches, a little more adjusted to the evolution and current status of the conflict, refer to the fact that the freezing of commercial lines with Ukraine, due to the difficult war situation and, in turn, the suspension of flights: The suspension of flights to and from Russia throughout Europe (as a result of the bans and sanctions) reveals a difficult reality that is generating a complex struggle between companies that have broken commercial ties with Russia due to the sanctions, on the one hand, and the closure of factories that jeopardise the global existence of such important products as aluminium, platinum, steel, nickel and sunflower oil, on the other.
Aspects related to port congestion in the United States due to the increase in the price of transport, correlated with the decrease in the purchase of fuels from Russia and the inevitable increase in energy prices, are being considered in the current reconfiguration of logistics activity. Also, the closure of industries and companies in Europe (Germany, United Kingdom and Austria) that require inputs such as aluminium, palladium, platinum and steel for the manufacture of automobiles is a scenario of important changes, as these materials are produced in abundance both in Russia and Ukraine. In the same vein, emphasis is placed on the impact on semiconductor companies, which are responsible for the design, manufacture and marketing of integrated circuits, so necessary in the production of power cables, coils, smart phones, computers, scanners, brakes, magnetic train accelerators and nuclear reactors, highlighting the importance of the raw materials that may no longer be produced at scale as a result of the war situation.
On the African continent, the effects of rising raw material costs have been observed with concern. This is because, as is well known, Africa is a net importer of wheat and sunflower oil, both of which are overproduced in the Black Sea region. Importantly, the disruption of commodity shipments, coupled with concerns about severe droughts in the region of the world, creates a carom effect that ends up creating significant food price inflation.
Conversely, it should be remembered that South Africa is a country that thrives economically on fruit exports to Russia. In 2020, 7% of its citrus fruit exports and 12% of its apple and pear exports went to that destination (Department of Agricultural Economics of the University of Stellenbosch, South Africa), which suggests that, in the midst of a possible escalation of the conflict, the country's trade balance will begin to decrease in that direction, reflecting large losses or red numbers.
Other parts of the world, such as the Middle East and Asia, could be affected by the trade disruption: Middle East and Asia, could be affected by the onslaught of trade disruption, as these are grain and oilseed importing economies from Ukraine and Russia. Similarly, as a significant increase in the price of these products is being recorded on a global scale (according to the FAO food price index for February 2022) as a result of the increase in demand and drought situations that even disrupt the Latin American region, this scenario will undoubtedly be exploited to the maximum and in the short term by other wheat exporting economies such as Canada, Australia and of course the United States: Canada, Australia and of course the United States.
If one takes into consideration the recent political position of Russian President Vladimir Putin, aimed at confronting the wave of sanction measures against his country, and warning that these are affecting the financing and logistics for the delivery of goods, it is easy to understand that world food prices will inexorably skyrocket in the short term, since both Russia and Belarus are among the world's largest suppliers of mineral fertilisers.
From the above it can be deduced that, in a global reality, made up of complex processes of production, distribution and consumption, characteristic of an increasingly interconnected World Economy, a specific armed conflict can generate a significant rearrangement of political, commercial and financial relations, affecting by far the integral logistics that are deployed to obtain products that influence the subsistence and evolution of the human species.