Over the past year, Resilinc’s supply chain disruption monitoring platform EventWatchAI has sent out 242 alerts on sanctions against Russia. Of these, 87% were classified as having high disruption potential due to the sanction’s overall supply chain impact (when alerts are sent to customers, EventWatchAI ranks each event from low, medium, and high to estimate the severity of the potential disruption). The most extreme sanctions have impacted supply and manufacturing capabilities across the Energy, Aerospace, Transportation, Chemicals, Metals, and Automotive industries.
Thus far in 2023, EventWatchAI has sent 19 updates related to sanctions against Russia; 15 of those alerts were sent in February alone. Below is a summary of the most recent alerts from eight different regions, along with insights into the supply chain impacts of these sanctions.
Since the start of the Russia-Ukraine war, Australia has imposed over 1,000 sanctions total (SanctionNews). On February 24, 2023, Australia imposed additional financial sanctions on 90 Russian individuals and 40 entities. These sanctions include one of Russia’s largest arms manufactures, a submarine developer, an aviation company, a missel designer, and infantry fighting vehicle. Australian Foreign Minister Penny Wong commented, “Australia is imposing additional sanctions, targeting those in the Russian Government who are helping prolong this war, those financing this war, and those spreading mistruths to justify this war.”
The country has also joined Canada, France, Germany, Italy, Japan, the UK, and the US by implementing the same price caps from G7 on refined petroleum products in Russia. As a result, impacts (similar to those from the EU Energy crisis) are expected including higher gas prices and a global shift to alternative energy.
The EU recently extended sanctions against Russia until February 24, 2024, making it the ninth package of sanctions introduced by the EU since February 2022. These sanctions include trade, financial, and personal impacts to 1,386 individuals and 171 legal entities.
The tenth package of sanctions, approved on February 25, 2023, proposes export bans worth more than $10 billion, “to deprive the Russian economy of critical technology and industrial goods” according to the President of the European Commission, Ursula von der Leyen. These sanctions will target goods such as electronics, specialized vehicles, machine parts, spare parts for trucks and engines, antennas and cranes (European Commission). The package adds about 121 individuals and 96 entities to the sanction list including Russian decision makers, senior government officials, and military leaders. For more details, read the official press release from the European Commission.
It is also worth noting, on February 5, 2023, the EU released a ban on Russian diesel and refined oil products. This ban has resulted in higher diesel prices and a shift towards cleaner energy. In fact, on March 28, 2023, the European Union energy ministers passed a law to ban the sale of CO2-emitting cars by 2035. Learn more about the impact of the EU diesel ban.
The UK imposed new sanctions against Russia on February 24, 2023; under the sanctions, 92 individuals and entities are targeted. These sanctions include export bans on all items used by Russian forces in the battlefield in Ukraine. Export bans also include steel and iron goods. Through coordination with allies, sales of aircraft parts, radio equipment, and electronic components will be targeted.
UK Business Trade Secretary Kemi Badenoch commented, “Trade sanctions are working. UK goods imports from Russia have fallen by 99%, since before the invasion, and goods exports to Russia have fallen by nearly 80%.” Russian imports are really falling. The combined worth of gas, oil, and coal from Russia to the UK fell from £4.5 billion in 2021, to £2.2 billion in 2022, and £1.3 billion in January 2023 (Express).
Since February 2022, Canada has sanctioned over 1,800 Russian individuals and legal entities. On February 2, 2023, Canada increased sanctions against Russia over the endorsement of disinformation and propaganda. Around 16 Russian entities and 38 individuals involved in Russia’s disinformation and propaganda were added to the sanctions list.
On February 26, Canada announced revisions to previous sanctions, set to affect 122 individuals including deputy prime ministers, Russian federation employees, and employees of the office of the president of Russia. The revision also includes 63 entities and 50 defense enterprises. A freeze decree is set on the Canadian properties and funds belonging to persons on the sanction list. An export ban is also applied to chemicals supplied to Russia that could be used for the manufacturing of electronics.
Most recently on March 10, 2023, Canada further amended sanctions against Russia to prohibit the import of Russian aluminum and steel products. Figures from the Department of Industry show that Canada imported $208 million in steel products from Russia in 2021 and $79 million in 2022. As for aluminum, Canada imported $44 million from Russia in 2021 and $16 million in 2022 (The Globe and Mail). Reflected in those numbers, between March and December 2022, the total value of imports to Canada from Russia plunged almost 80% to $414 million from $1.9 billion year over year (Global News.)
These sanctions should not have a great impact on Canada’s aluminum and steel supplies thanks to Canada and the United States aluminum and steel supply chain. Canada is the world’s largest exporter of raw aluminum—exporting over eight billion in raw aluminum in 2021—with seven billion going to the US. As for steel, Canada accounts for 45% of the US’s steel exports. In 2021, $17.4 billion worth of steel was traded between Canada and the US according to the Government of Canada.
On January 31, the Ukraine sanctioned 182 legal entities and 3 individuals in Russia and Belarus. These sanctions include asset freezes, trade operations, transit of resources, flights, and companies involved in transporting Russian military equipment and soldiers (Sanctions News). The President of Ukraine, Volodymyr Zelenskyy commented in a video address, “Their assets in Ukraine are blocked, their properties will be used for our defense.” Industries to be impacted by these sanctions include chemical, transportation, energy, and leasing companies.
Switzerland has implemented the EU’s ninth package of sanctions against Russia adopted on December 16, 2022, and also added new measures. Part of the ban by the EU includes the ban of diesel and other refined oil products from Russia, along with a price limit established by G7 countries. As of November 25, 2022, Switzerland had frozen financial assets worth $7.94 billion under sanctions against Russia. In retaliation, Russia closed its airspace to Switzerland (CNN).
Around 200 individuals and entities have been sanctioned with industry impacts to aerospace, chemicals, mining, and marketing. In aerospace, new sanctions include restrictions to aircraft engines and their parts for both manned and unmanned aerial vehicles (MSN). These sanctions should have a great impact on Russia’s economic power considering about 80% of Russian commodities are traded through Switzerland, and about $11 billion worth of private Russian assets are in Swiss banks (Brown Political Review).
On February 6, Japan tightened sanctions against Russia for 36 individuals and 53 organizations. The sanctions include asset freezes and export bans on products that could be used to enhanced Russia’s military capabilities. The following products cannot be shipped from Japan to organizations in Russia following the sanctions: water cannons, gas exploration equipment, semiconductor equipment for vaccines, x-ray inspection equipment, explosives, and robots (Yahoo!).
Assets belonging to three entities and 22 individuals in Russia have also been marked for a freeze order including aircraft company JSC Irkut Corp. and surface-to-air missel maker MMZ Avangard. Individuals include Russia’s deputy defense minister, the justice minister, and 14 pro-Moscow individuals related to the “annexation” of parts of the southeastern Ukraine region.
As a part of G7, Japan has also implemented price limits for Russian oil products transported by sea. Japan should be largely unaffected by these price limits considering just 4.1% of oil imports came from Russia in 2020. That same year, about 90% of oil came from the middle east (JapanTimes). In case of emergency, Japan also stores 90 days’ worth of oil reserves as a member of the International Energy Agency (IEA).
On February 24, the US imposed new sanctions on Russia. These sanctions target the Russian metals, minerals, electronics, and chemical sectors. The first set of sanctions falls under the Department of State which include sanctions against 60 individuals and entities who have employed policies of aggression against Ukraine, three entities involved in Russian energy production, and four individuals and 22 entities in Russia’s advanced technology sector (US Department of State).
The next batch of sanctions falls under the Department of Treasury. These sanctions cover financial institutions including one of Russia’s largest banks (The Wall Street Journal). Additionally, the Treasury had designated four entities that have operated in the metals and mining sector in Russia.
President Biden also announced additional tariff increased on most metal, and metal products from Russia—doubling tariffs from 35% to 70%. The goods that fall under these tariffs are worth approximately $2.8 billion, according to United States Trade Representative Katherine Thai. This is unlikely to have a significant impact on the global aluminum market; Russia is only the sixth largest aluminum supplier to the US and accounted for only 2.3% of all aluminum imports in 2021. Canada, however, is the US’s largest importer and accounted for 38% of total aluminum imports in the US in 2021 (World’s Top Exports).
Best Practices for Staying Ahead of Russian Sanctions
As more sanctions against Russia are passed, Resilinc advises companies to identify countries of origin for suppliers, including tier-2 and tier-3 suppliers. Even if your main suppliers do not have ties to Russia, suppliers who are deeper in your supply chain might—making it crucial to map your supply chain to gain visibility. After identifying where your suppliers are located, develop a playbook with alternative sites wherever available or book capacity at alternate sites. For suppliers who rely on Russia or Ukraine for energy or commodities, closely monitor their financials.
As always, plan ahead instead of using a “wait and see” approach. Map your supply chain, make a game plan, and communicate with your suppliers in advance to ensure minimal disruptions. By doing so, you can act quickly and secure top revenue products even when new sanctions are passed.
For more details on the latest sanctions, and how you can prepare your supply chain to weather disruptions caused by these sanctions, download Resilinc’s Special Report: Russian Sanctions: Navigating Supply Chain Impacts and Potential Outlook.