We are likely witnessing the beginning of the largest disruption to global supply chains in the post-World War II era.  Between the COVID pandemic, the ongoing U.S.-China trade war, severe weather events, cyber attacks, and now the Russian invasion of Ukraine, policymakers around the world are starting to understand that supply chain disruption is the new normal and beginning to prioritize supply chain security and resilience during what is expected to be a period of long-term international instability.

While it is difficult to predict how long Russia’s war against Ukraine will last, many commentators believe that war may be long and protracted.  As long as the conflict lasts, we would expect more sanctions and other measures to be promulgated.  This will prompt supply chain realignments, including greater decoupling from the Russian economy. These measures will start as temporary but could become long-term or even permanent.

In addition, China’s de facto alliance with Russia since the start of the war will likely provide additional momentum for de-coupling with China as well, including the development of regional and plurilateral approaches to onshoring/reshoring and “friend-shoring” supply chains.  These shifts of alignments will have major consequences for the production and movement of goods, ranging from automobiles, semiconductors, and oil and gas, to food and agricultural commodities. Global companies will increasingly be faced with choosing between abiding by Western sanctions and export controls or Chinese and Russian law.

Continue Reading Impacts of Russia’s Invasion of Ukraine on Global Supply Chains, Part I

Following Russia’s military invasion of Ukraine on February 24, 2022, the United States and other major global economies have taken a range of actions to impose economic costs on Russia and Russian interests.  These actions initially consisted of economic sanctions targeting Russian companies and individuals, but have been expanded to include trade in goods.

On March 11, 2022, the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), as well as the European Union, issued a statement announcing their intention to impose additional economic costs on Russia in response to its military invasion of Ukraine, including with respect to trade in goods.  The joint statement included a range of commitments aimed at isolating Russia from the world’s major economies and global financial institutions, including revoking Russia’s “Most Favored Nation” (MFN) status, which affords Russian imports access to favorable tariff rates among World Trade Organization (WTO) members, and imposing additional restrictions on exports and imports of “key goods and technologies” to Russia.

As discussed below, the United States, the European Union, and the United Kingdom have each taken steps to effectuate the G7 statement.  In addition to revoking Russia’s MFN status, thereby increasing the cost of Russian imports generally, these jurisdictions have all imposed certain product-specific restrictions on the importation and/or exportation of specific goods from and/or to Russia.  In certain instances, these measures have also been extended to cover trade with Russia’s ally Belarus.

 
Continue Reading Major Global Economies Take Aim at Trade with Russia Following Military Invasion of Ukraine