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Russia-Ukraine War Substantially Damaged Global Supply Chain, Report Says

Just when businesses thought the supply chain crisis couldn't get much worse, Russia's invasion of Ukraine disrupted global trade even further. The conflict has increased shipping costs, complicated logistics and increased transit times, according to a new report from the United Nations Conference on Trade and Development (UNCTAD).

"The war in the Ukraine is stifling trade and logistics of Ukraine and the Black Sea region," the report reads. "The search for alternate trade routes for Ukrainian goods has rapidly increased the demands on land and maritime transport infrastructure and services. For Ukraine's trading partners, many commodities now have to be sourced from further away. This has increased global vessel demand and the cost of shipping around the world."

The report says nearly half the reason for rising food costs can be attributed to rising shipping costs. The price to transport dry bulk goods, such as grain, increased nearly 60% between February and May of this year.

But the problems don't stop at businesses that trade in the Black Sea region—the implications reach much further. "Confronted with trade restrictions and logistical challenges, the cost of oil and gas has increased as alternative sources of supply, often at more distant locations, are called upon," the report reads. "Higher energy costs have led to higher marine bunker prices, increasing shipping costs for all sectors."

Roughly five months after the conflict began, these issues are still prevalent. The UNCTAD recommends the following steps if supply issues are to be alleviated:

· "There will be no effective solution to the food crisis without reintegrating Ukraine's food production, as well as the food and fertilizer produced by the Russian Federation into world markets—despite the war."

· "Ensure that Ukrainian ports are open to international shipping to allow Ukrainian grain to reach overseas markets, at lower shipping costs."

· "Lower transaction cost for the food and fertilizer exports of the Russian Federation."

· "Ensure collaboration among vessel flag States, port States and industry continue to provide all necessary services, including bunkering supplies, health services for sailors, and certification of regulatory compliance. This will help to keep the negative impacts on costs, insurance premiums and operations to a minimum."

· "Ease the transit and movement of transport workers, albeit temporarily, to lessen the pressure on cross-border trade and transit."

· "Invest in transport services, as well as trade and transit facilitation even more than in pre-war times. Trading partners and transit countries should focus on key determinants of international transport costs such as trade facilitation and digitalization, infrastructure, economies of scale, imbalances and ensuring competition."

· "Support developing countries (including MICS), especially the most vulnerable economies such as SIDS, LDCs and net food importers. The war in Ukraine adds to the challenges posed by the

COVID-19 pandemic and the climate crisis. The international community's support is needed to provide financial and technical assistance related to transport and trade facilitation." 

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Monday, 15 August 2022