June 26, 2022

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Sanctions have ‘virtually wrecked all logistics’ in Russia, transport minister admits

Sanctions have ‘virtually wrecked all logistics’ in Russia, transport minister admits

A Kremlin official admitted that western sanctions were stopping the Russian economy from functioning.

Minister of Transport Vitaly Savelyev told state media that punitive measures had “virtually wrecked” Russian trade logistics, the Kremlin’s transport minister was quoted by Interfax as saying.

He said Russia was being forced to consider alternative trade routes, including the north-south corridor running from Moscow through central Asia to India.

“The sanctions imposed on the Russian Federation today have virtually wrecked all the logistics in our country. And we are forced to look for new logistics corridors,” Mr Savelyev said.

Much of Russian trade on the standard route from St Petersburg around Europe and through the Suez Canal has been cut off by trade embargos from western countries.

The world’s three biggest shipping companies, MSC, Maersk and CMA CGM, are all blocked from trading with Russia due to sanctions.

Mr Savelyev said Russia could turn to the north-south corridor to alleviate its trade problems. The corridor is a transit route for moving freight between India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia and Europe – via ship, rail and road.

Russia could capitalise on the Caspian Sea ports of Astrakhan, Olya, and Makhachkala, Mr Savelyev said, though he warned the ports may not have the capacity to process the volume of trade previously sent on the standard route.

Asia has been growing in significance for the Russian market in recent years as western countries have hit Moscow with consecutive rounds of sanctions targeting its economy.

The total value of imports and exports with China rose by more than 50 per cent from 2014 – when Russia was sanctioned for annexing Crimea – to 2021.

China and India, the 1st and 3rd largest Asian economies, have refused to cut ties with Russia for invading Ukraine. India plans a $2bn increase in shipping goods to Russia, according to Bloomberg.

Russia earlier this week bargained with the west over sanctions. The Russian blockade of Ukrainian ports is forcing global food prices up as one of the world’s largest exporters of grain is unable to reach foreign markets.

The UN has warned the world faces an unprecedented crisis with widespread hunger in poorer countries and the risk of political upheaval even in richer countries as food supplies dwindle.

Russia said it would only stop the blockade of Ukraine’s ports in exchange for sanctions relief. In response, the US said Russia was weaponising food shortages to hold the world hostage.