The world has been turned upside down, this column opined at the start of March following the Russian invasion of Ukraine.
Oil prices had hit $130 per barrel, gas values soared, nickel trading was suspended, Ukraine ports were closed, marine insurance rates rocketed and freight rates gyrated with every new move to ratchet up sanctions.
Nearly four months on, both shipping and the wider industrialised world has come to terms with some aspects of the conflict — although oil prices remain high at $117, gas prices are up 77% on this time last year, Ukrainian ports are shut and freight rates unpredictable. Oh, and Russia defaulted on its foreign debt for the first time since the Bolshevik Revolution in 1917.
The war goes on and the impacts, while more normalised, are still arguably as traumatic as the Covid pandemic that preceded it.
Maybe the world’s not “upside down” anymore, but still “inside out”. And this conflict around the Black Sea has pointed out just how interconnected global trade and its participants have become but how opaque this world remains.
This week, the Indian Register of Shipping (IRClass) pushed aside accusations that it was providing sanctuary to 70 Sovcomflot (SCF Group) tankers that had moved from the Russian flag to the Mumbai-based registry.
IRClass argued that “the vessels are operated by various entities in Dubai and in other parts of the world. None of the companies which own the ships are registered in Russia”.
IRClass is a member of the blue-chip International Association of Classification Societies along with the likes of Lloyd’s Register, ABS and DNV. The latter three have steered clear of any involvement in Sovcomflot vessels as they moved out of Russia. Have the 70 ships been sold to independent new owners or are they still controlled ultimately by Russian interests? Who knows?
IRClass might be less interested in that question because, as it points out, neither the United Nations nor India itself has imposed sanctions on Russia. Narendra Modi, the Indian prime minister, has avoided public criticism of his Russian President Vladimir Putin.
The associated question around Russian shipping is how to deal with those oil and gas exports that have become so important to Western economies.
Leaders of the so-called G7 “advanced economies” were huddled together this week in Germany trying to find ways of turning off the financial tap for the Kremlin’s war machine.
A cap on Russian energy prices is being considered in a bid to cut Moscow’s revenues and hopefully reduce soaring global inflation.
The exact mechanism for doing this — possibly involving limiting the availability of insurance for Russian oil shipments and shipping services — remains unclear and many, including ExxonMobil boss Darren Woods, have questioned whether this is even realistic.
And while this is going on, a wider and more important issue is developing around the use of fossil fuels and decarbonisation.
Not only have these various sanctions led by the US and Europe changed the patterns of trade but they have also led to energy security being prioritised over decarbonisation.
Many political leaders accept that the long-term solution to dependence on Russian fossil fuels is to move quicker towards renewables
Many political leaders accept that the long-term solution to dependence on Russian fossil fuels is to move quicker towards renewables.
But short-term thinking is different. With Russia threatening to halt all gas shipments to Europe, continental countries are trying to keep open coal-fired power stations that were slated for closure to reduce CO2 emissions.
This has wider significance for the maritime world, which had been badly split by arguments over how — or at least how fast — to decarbonise along with all the technological and cost complications.
There can be no doubt that the Ukraine war has reduced some of the immediate pressure on shipowners and others. This is no doubt welcome to the industry but also dangerous given global carbon emissions are continuing to rise despite the dire consequences longer term.
Forward-looking companies such as Danish liner giant AP Moller-Maersk continue to order new methanol-powered vessels: a new mega order is expected shortly.
And debates continue over the future role of gas, with liner giant CMA CGM this week showing its hand by signing a multi-year agreement with Shell for LNG supplies to propel its vessels.
Liner companies in particular who have been raking in windfall profits from a post-Covid freight rate boom are in a good position to lead the “green” way.
But the Ukraine war has accelerated rising interest rates and there are warnings everywhere about a looming global economic recession that could further undermine climate action.