Russian sanctions could become serious now

The meltdown between the West and Russia in 2014, including breaks between western companies and the Russian energy sector, is only a small sample of what is in store this year. According to a Russia analyst, this freezing has only just begun and more companies could be hit.
Global Ports terminal i Rusland.
Global Ports terminal i Rusland.

If the western offshore sector and industry in general were hoping for a turnaround in the relationship with Russia in 2015, what they got was in fact the complete opposite: The year began in virtually the worst way possible for the companies in the oil and gas sector that already saw a significant reduction in their orders last year - either due to the western boycott or following Russian retaliations.

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Jens Worning is external lecturer at the University of Copenhagen and former Danish Consul General in St. Petersburg. He is intimately familiar with the political and commercial conditions in Russia, not least the country's transport sector, as he has collaborated officially with the Russian Ministry of Transport.

He has no doubts that the relationship between the two parties has become significantly worse in January, that the EU Commission will increase the sanctions significantly tommorow, and that an improvement of the political and commercial relations has now been pushed very far into the future.

New Russian sanctions could hit carriers and ports

"Things indicate that the Minsk Process, the agreement that the West and Russia have managed to agree on in their efforts to come up with a long-term solution, is fading. Putin has - albeit somewhat laconically - continuously closed his records of the phone meetings with western leaders by referring to the agreement. He did not do so following the latest meeting with Angela Merkel. The tone between the West and Russia has changed and become considerably worse," Jens Worning tells ShippingWatch.

EU President will demonstrate ability to act

Numerous companies, including Viking Supply Ships and partially Maersk-owned port company Global Ports, have noted the consequences through effects such as canceled orders and declining revenues. These companies were likely hoping for a degree of reconciliation this year, but in light of the most recent attacks in eastern Ukraine, allegedly perpetrated by pro-Russian troops, and with a new EU Commission, the situation has once again changed completely.

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In particular, he says, the EU's new President, Donald Tusk of Poland, is looking to demonstrate his ability to act after some observers have accused the EU of hesitating. As such, Jens Worning is confident that the EU's foreign ministers will increase the sanctions tomorrow so that they impact higher number of individuals and companies.

"This will likely apply to the sectors that are already subject to sanctions: Energy, the Arctic and banking," he says.

GRM: New sanctions against Russia will not affect oil prices

An even more serious development on the long term could be the fact that the rhetoric used between the parties has intensified considerably in the new year as fighting in eastern Ukraine has escalated. In Vladimir Putin's most recent speech at his home university, he implied that NATO-led troops were responsible for the latest conflict with new bombings.

"The conflict looks set to enter a new and tougher stage," says Jens Worning.

The Russian market in general represents a very small part of the Maersk Group's combined market, at just a few percent. Maersk Line's European feeder carrier, Seago Line, has noted that non-EU countries have replaced the trade impacted by the EU boycott.

Other carriers and companies working with Russia include DFDS, Unifeeder and DSV.

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