Monday, November 28, 2022

Europe decided not to mess with Russia

The European Union announced the fifth package of sanctions against Russia, which, among other things, will significantly affect logistics. Europe will prohibit the admission of Russian ships and ships under Russian control to its ports, making an exception for agricultural and energy cargo, as well as access to Russian and Belarusian road carriers. How exactly this ban will be executed is not yet clear. In the current wording, according to market participants, it can lead to a halt in trade with the EU: the alternative route will be super-expensive Turkey. But a lot depends on the definition of the carrier – market participants expect a flow of the Russian-Belarusian share in servicing trade with the EU to the Baltic and Polish companies that are still dominant.

European Commission President Ursula von der Leyen announced the content of the new (fifth) package of sanctions against Russia. Among the proposed measures are restrictions on Russian coal imports, operations with four Russian banks, export and import restrictions of €10 billion and €5.5 billion, respectively.

There are also sanctions in the field of logistics. We are talking about a ban for Russian ships and ships under Russian control of access to EU ports. As Mrs. von der Leyen specified, the ban will not affect certain types of cargo, such as agricultural products and food, humanitarian and energy cargo. It is also planned to impose a ban on road carriers from Russia and Belarus: “This ban will sharply narrow the options for the Russian industry to receive key goods.”

At the time of going to print, the official text of the sanctions had not yet been published, and therefore, the definitions of which ship should be considered Russian and how the ban for road carriers would be technically organized are also unclear. In the Russian Chamber of Shipping, they refused to comment until the situation was clarified, and the road carriers cannot yet assess the scale of losses.

If the draft of the fifth package of sanctions is adopted in this form, with a ban on the entry of Russian and Belarusian carriers into the EU, most likely, the Russian government will “respond in a mirror way,” believes Yulia Shlenskaya, general director of the KBT customs broker. “And then the flow of goods between Russia and Belarus with the EU will actually be stopped,” she says. “No trade with the European Union.” The only possible option, Ms. Shlenskaya believes, will remain the road through Turkey, “but this will entail such a rise in the cost of goods that only what someone needs a nosebleed will be delivered.”

Let’s assume that the ban will affect carriers, that is, companies registered in Russia or Belarus and operating vehicles with RU and BY numbers, but not forwarders, says Alexei Misailov, director of business development at FM Logistic in Russia. “But Russian and Belarusian carriers did not play a dominant role in cross-border transportation, they accounted for about 30%, while companies from Lithuania, Latvia and Poland always played the main role, thanks to state support and benefits,” he explains.

Of course, the ban will be a certain blow to the market, Mr. Misailov admits, but it should be noted that major players now have parks registered in both Belarus and Lithuania in order to avoid problems with obtaining two- and three-way permits (documents permitting entry) . Probably, the result of the ban, Mr. Misailov believes, will be a flow from one residence to another and the share of Polish and Baltic carriers in cross-border trade, which has not yet completely stopped, will grow.

The president of the Gruzavtotrans association, Vladimir Matyagin, notes that carriers are already reorienting themselves from the European market to the domestic market, as well as to the markets of eastern and southern countries. In his opinion, Russia and Belarus should themselves prohibit the exit of their carriers to the EU, where their vehicles bear the risk of confiscation, and also ban the entry of European road carriers.

Natalya Skorlygina

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