Counter strike

Window to Europe or South America?

Russia has responded to western sanctions with its own ones. However, unlike western sanctions restricting supplies to the Russian Federation, Russian sanctions limit import from opposing countries. Counter sanctions cover quite a wide range of food products.

According to the participants of the North West region’s stevedoring market interviewed by IAA PortNews, food-related sanctions can in the short-term and mid-term lead to increased transshipment of containerized cargo, mostly refrigerated cargo, via seaports of Russia due to cargo flows from the Latin America and other alternative exporters. At the same time, counter sanctions are to harm land carriers specializing in transportation of European food products to Russia. In case of long-running “war of sanctions”, imports can be gradually phased out and volumes of incoming products from “alternative” states can decrease. However, nobody risks taking a long shot as the consequences of sanctions are a shrink wrapped.

Moreover, Russia mulls further toughening of counter sanctions. They can cover industrial goods including automobiles and equipment, consumer goods. With such a scenario, terminals focused on transshipment of imported automobiles will have to change their profile. Meanwhile, development of related manufacturers within Russia may result in surging supplies of components in containers. Yet, this forecast should be well measured as it will depend on domestic demand and localization level. In fact, the demand for new automobiles has been decreasing recently.

Doorway to Asia

The sanctions can cause the alteration of raw materials’ supply chains. For example, Polish Parliament is considering a possibility to ban imports of Russian coal. Russia, in its turn, is now more focused on Asia-Pacific Region where sanctions against Russia are supported by only Japan and Australia so far. Japan is the sales market for Russian energy and it is not likely to fully refuse the supplies while Australia is a powerful rival in supplies of both coal and LNG. 

Earlier Australian companies expressed intentions to share interest in Russian oil projects in exchange for Russia’s participation in Australia’s LNG projects as we wrote before >>>> . Those proposals seem out of policy today. In the context of western sanctions against Russian companies implementing gas projects, this fact may significantly undermine the prospects of Russian LNG to enter foreign markets and, therefore, harm large-scale projects on gas production and transportation. Even without sanctions Russia hardly had time to “catch the train” of global LNG market.

As of today, Russia has the only plant producing export LNG. It operates under Sakhalin-2 project. However, there have been announced a number of new projects including Yamal-LNG, Baltic LNG, Vyborg based project, Vladivostok LNG, Sakhalin based project of Rosneft, Pechora LNG, project in Teriberka. Nordic Yards and Rosneft also announced their projects in Gorskaya (Saint-Petersburg) and on the coast of the Gulf of Finland respectively. Moreover, the majority of the projects to be located in the Gulf of Finland implied LNG bunkering in view of introduction of new restrictions on sulphur content in bunker fuel (0.1% from 2015). However, their profitability should be ensured mainly by LNG exports. Read more about Russian projects on construction of LNG terminals in new edition of “Port Service. Bunkering market.” journal available in the office of IAA PortNews >>>> 

Anyway, the Asian market is more promising than the European one in terms of raw materials supplies. The question is “just” in creation of an adequate infrastructure and debottlenecking of railway approaches. It is the insufficient capacity of Transsib and BAM (even considering the supposed improvement) that hinders expansion of deliveries to the Asia Pacific Region.

So, refocusing of Russia’s foreign trade eastwards also has its limits and faces certain challenges.

Moreover, in case of long-running “war of sanctions” Russia may leave the WTO which is most likely to have a general negative impact on foreign trade activities and total throughput of Russia’s seaports. 

Vitaly Chernov