This article is written by Austin Garcia
The Russia-Ukraine War, which began on February 24th, 2023, has since reached it’s 2-year anniversary on Saturday. Since its beginning, it has led to a significant shift in global shipping routes. Russia has switched its shipments east to maintain high oil and gas revenues, while Ukraine has been creative to ensure its exports reach the market without superpower interference. Gabon’s flag has grown by 287% to 3.1 million gt, and 52% of the global fleet is classified by International Association of Classification Societies members.
Russia was a major exporter of crude oil and petroleum products to Europe before the invasion, accounting for 2.6m barrels per day of crude oil and 1.3m barrels per day of products. However, these volumes have plummeted due to the conflict, with many cargoes finding alternative destinations, particularly crude oil re-routed to Asia. Europe has sought alternative sources to replace lost Russian volumes, leading to a diversification of supply.
The LNG trade map has also changed since the invasion, with increased US LNG imports into Europe and displacing Asian LNG imports. This has resulted in a decline in LNG carrier tonne miles for most of 2021 and into the first half of 2022, with Asia sourcing cargoes from shorter Middle Eastern routes.
To add insult to injury, a Palau-flagged cargo ship, Islander, was recently targeted with two missiles off Aden, causing minor damage. The ship was aided by nearby military support. Western military forces have shot down drones in the region. Operations in the Red and Arabian Seas, Bab al-Mandab Strait, and the Gulf of Aden are ongoing. The UN Conference on Trade and Development reports increased vessel speeds are causing more fuel consumption, potentially increasing greenhouse gas emissions by 70%.These interconnected wars have increased the severity of the west, by shifting several key trade routes due to fear from attack on both sides.
The war has led to increased trade costs, infrastructure destruction, and reduced aggregate demand due to falling business/consumer confidence and rising uncertainty. Russia has faced an unprecedented number of economic sanctions, including exclusion from major global financial services and freezing around $280 billion USD of its central bank assets. These impacts have darkened the prospects for the global economy and have downgraded growth expectations.
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