Already disrupting the shipping of container and commodity trades, sanctions against Russia are also having an impact through the actions of OEMs, class and crewing companies.
In an update to its Trade and Development report published on 24 March, UNCTAD says that while Russia will experience a deep recession this year, significant slowdowns in growth are also expected in parts of Western Europe and Central, South and South-East Asia: “The war has put further upward pressure on international prices of energy and primary commodities, stretching household budgets and adding to production costs, while disruptions to trade and the effects of sanctions are likely to have a chilling effect on long-term investment.”
Zvezda is currently constructing the first in a series of next-generation dual-fuel LNG carriers, which are intended to complement existing vessels, including Christophe de Margerie (pictured).
“Zvezda Shipyard is at the centre of the Russian Federation’s LNG carrier construction programme.” “/ / 
Source: Zvezda Shipbuilding Complex
Zvezda Shipyard is at the centre of the Russian Federation’s LNG carrier construction programme.
UNCTAD predicts a rapidly worsening outlook for the world economy, underpinned by rising food, fuel and fertilizer prices, heightened financial volatility, sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs.
For now, though, the shipping industry is focusing on compliance and ensuring the safety of employees and crews.
Cummins says that sanctions are making it increasingly difficult to fulfill its supply and order commitments in Russia. “All orders are under evaluation, and we are evaluating our warranty and service capabilities as well,” said Jon Mills, Director – External Communications.
On 17 March, the Cummins Board of Directors made the decision to suspend all commercial operations in Russia indefinitely. The company is now taking steps to wind down operations expeditiously. Of primary concern is the safety and wellbeing of those whose lives have been affected. “We strongly condemn the actions of the Russian government, which is putting millions of innocent people at risk and turning millions of Ukrainian citizens into refugees. That concern also extends to our 700 employees and thousands of end-user customers in Russia and the impact on citizens who are not participants in this invasion.”
Wärtsilä has suspended all deliveries and sales to Russia and Belarus and will follow the EU sanctions framework. Part of the suspension involves training which has been halted for Russian legal entities. Training can be offered to Russian nationals working for non-Russian legal entities, but not to any residents of Russia.
MAN Energy Solutions is fully complying with EU sanctions. All existing contracts and orders connected to Russia are being reviewed on a case-by-case base and may require single license authorization by the competent authorities.
A Kongsberg Maritime spokesperson said: “As a large supplier of maritime equipment, the war in Ukraine affects our business when it comes to logistics and sourcing of material. There are also delays in some ongoing project deliveries with our customers due to the current sanctions. The situation is unpredictable, but our global team is working hard to overcome the challenges and support shipbuilders and shipowners the best we can. So far this has been manageable and with limited financial consequences to KONGSBERG. We have no operations in Ukraine or Belarus. However, we had a small maritime team of about 10 people in Russia. This operation is suspended.”
A spokesperson for Mitsubishi Heavy Industries said the company is watching developments with concern and heavy hearts. “Our thoughts are with our customers, business partners, and all those affected, and we hope for a peaceful resolution. We are in compliance with relevant international sanctions imposed by the governments in the regions where we operate. We will continue to follow the latest developments closely and will act in accordance with those governments’ guidelines.”
Class winds down Russian business
Leading class societies are winding down their Russian operations. “We are deeply disturbed by the invasion of Ukraine which is inflicting terrible harm to the citizens of Ukraine and threatening peace across the region,” said Remi Eriksen, president and CEO, DNV Group. “Our top priority is the safety of our people, and we are working to ensure our employees have the support they need. We are reviewing our existing business portfolio with Russian entities and are winding down all related business.”
Lloyd’s Register has confirmed that it will disengage from the provision of all services to Russian owned, controlled or managed assets and companies and will be communicating directly with all affected parties.
ABS has also taken the decision to withdraw all class services involving Russian vessels, assets and companies. “As a U.S. company, ABS strictly follows both the letter and the spirit of U.S. sanctions’ law. ABS is in the process of communicating with all affected clients and stakeholders to ensure a safe and orderly transition out of ABS Class. ABS is in contact with all employees in the region and working to ensure their safety.”
RS responds to IACS move
The Russian Maritime Register of Shipping (RS) has responded to what it says is an illegitimate decision adopted by International Association of Classification Societies (IACS) to withdraw its membership of the association, advising:
“RS declares that the IACS Council decision as of March 11, 2022 affects in no way either the class status of the RS-classed ships, or validity or terms of the certificates issued by RS in compliance with the authorizations granted by Maritime Administrations (MA). Should any special instructions by MA be given due to the current situation, RS will notify the parties involved in a timely manner.
“RS fulfills all obligations to customers as normal and continues to render services aimed at the improvement of standards of safety of life at sea, safety of navigation, safe carriage of goods by sea and in inland waters as well as at environmental pollution prevention.”
RS is recognized by 68 flag states, has a network of over 50 offices worldwide and says it has sufficient number of highly qualified surveyors to provide classification and survey services rendered promptly and safely in almost any region.
Crewing challenges
Henrik Jensen, Managing Director, Danica Crewing Specialists, has not reported any injuries or fatalities among seafarers at home, seafarers’ families, or office staff. However, the company is no longer in contact with some seafaring communities, such as Mariupol, where communications have been cut off.
“We have a large office presence in Ukraine with dedicated staff. Our offices are now unmanned, but our amazing staff are providing our services from their homes, as they did during the pandemic, and even, sometimes, from bomb shelters. They are being supported by our other offices, particularly in Hamburg and Riga.
“Should the situation worsen and it becomes impossible for our staff to remain in Ukraine, or communication systems are cut, then we have a contingency plan to fully transfer our Ukrainian operations to our other offices, including our new location in Cyprus. As they did during the Covid-19 pandemic, our staff are supporting our seafarers at sea by helping them to keep in touch with their families at home, as much as is possible.”
Needless to say, the situation in Ukraine is causing tremendous stress to Ukrainian seafarers at sea, he says. Danica is working with its shipowners to ensure crew have access to reliable and professional mental support services. “Fortunately, at present we are still able to fulfil our crewing obligations to our customers. Some of our crew are remaining on their vessels beyond their expected relief dates, as they did during the pandemic, while we are also able to supply crew from our global supply chain, including Latvia and Germany, and via our partner companies in the Netherlands and the Philippines.
“We are also assisting our Russian seafarers who continue to work on board ships in these difficult circumstances, and we are in constant touch with our shipowners to advise on what to do about their crew remuneration and to update them on global sanctions and their implications. These are difficult times but we are pleased to advise that we have had no serious instances of conflict onboard and our seafarers are working together professionally.”
Running foul of sanctions
Holland & Knight has issued an alert highlighting developments such as the US Department of Justice’s new task force KleptoCapture, an interagency group dedicated to enforcing sanctions.
“As an example of the potential impacts, shipping companies could run afoul of sanctions if they pay a Russian crewmember through a sanctioned bank, make payments for services or supplies rendered at a port or marina to a Russian-controlled vessel or yacht, such as bunkers provided to yachts owned by Russian oligarchs, repairs rendered and the shipyards doing work. Of course, the ever-present risk to a shipowner and operator is if a P&I Club cancels or suspends insurance cover (a ship’s so-called “ticket to trade”) due to transactions that present an unacceptable sanctions risk or violate respective club rules.”
