The invasion of Ukraine by Russian forces in late February spurred a flurry of coordinated sanctions worldwide, intended on pressuring the government of Russia to withdraw. However, in addition to creating economic pressure within the Russian Federation, the targeted sanctions programs and enhanced export controls are creating additional challenges to trade flows. Logistics firms are making hard choices about their current operations, and in many cases are creating additional pressures on already taxed supply chains.
Closing of airspace makes flights longer: not just for Russian aircraft but for flights originating in the West as well. Recently an Air Bridge Cargo flight had to divert to Moscow after flight controllers refused to clear the aircraft into EU airspace. Additionally, western cargo carriers may experience longer flight times and inconvenient routing as most polar routes to and from Asia will not be able to enter Russian controlled airspace. The longer sub-polar routes will increase the need for refueling stops, meaning possession of a landing slot at Anchorage, Alaska just became quite valuable. Air cargo is not alone in the re-routing situation, as express consignment operations have also been disrupted. While DHL is suspending service to Ukraine citing airspace safety issues, FedEx and UPS have both announced the suspension of services to both Russia and Ukraine.
Sanctions listings often lead companies to reconsider the reputational risk of continuing direct trade, even if sanctions would not specifically prohibit it. In normal times, Asia-located freight too bulky for air cargo, but too time sensitive for sea, could be routed via rail from Beijing through Russia to European railheads. However, cargo operators like Flexport have stopped booking on the China to Europe Trans-Siberian railroad service. While Russian Railroads does find itself on the list of “crucial major Russian enterprises” which subject them to restrictions on “all transactions in, provision of financing for, and other dealings in new debt … and new equity,” the sanctions do not prevent use of the railroad.
Logistics managers and compliance teams need to factor in potential costs in dollars and time, along with making hard decisions about the risk of continuing business relationships due to the conflict and the increasing imposition of trade sanctions by western nations.