Russia - Ukraine Crisis Potential Impact on Global Mobility
Russia - Ukraine Crisis Potential Impact on Global Mobility

Russia - Ukraine Crisis Potential Impact on Global Mobility

Industry Alert

Published: Mar 1, 2022

Our hearts go out to the people of Ukraine and the surrounding countries, and we hope there will be a swift resolution to the crisis at hand. First and foremost, we want to make sure your employees are safe and understand how they are supported by their company. Consider putting a pause on expats heading to Russia or Ukraine and stopping any non-essential travel within the region.

Understand where your employees are, be it going into or out of Russia or Ukraine. Many countries are encouraging their citizens to leave Russia. Flights are becoming exceedingly difficult to book, as more countries are closing their airspace to Russian airlines, especially in Europe. Most are needing to route to the Middle East and then reroute to Europe. Some airlines are suspending flights to/from several Asian countries to avoid flying over Russian airspace.

Due to the volatility in the region, most U.S. banks have stopped sending funds to Russia at this time. We are currently exploring work-around options to cover expat expenses for rent, goods and services allowances and other needed payments. If the issue persists, some clients may wish to move employees to an interim third country location. NEI can support the temporary living needs for those who will be evacuating expats or other employees out of either Ukraine or Russia.

The situation with Russia advancing on Ukraine has sparked global uncertainty and concern for the human toll and economic impact it could have in several areas affecting global mobility. Our best advice currently is to pay attention and be aware of the volatile situation.

From an economic point of view, the three biggest areas of concern are the impact of cyberattacks, the cost of fuel and industry concerns from sanctions having a far-reaching impact on multiple levels affecting our clients’ businesses, as well as those who are relocating or already on assignment.

Cyberattacks and Shipping Concerns

Back in 2017, Maersk, then the world’s largest shipping line, and TNT systems were indirect casualties of a Russian cyberattack upon Ukraine. That incident impacted the shipper in a manner that took several weeks to repair and return to full operations. Following this attack, ports and terminals have boosted cyber defenses, but that does not mean they will not be impacted. It just means that their recovery time may be reduced.

As we all know, the current situation with the global supply chain is more fragile and stressed than it was before the pandemic. If such an incident were to occur today, it could have a crippling effect on the global supply chain.

Global internet connections are interwoven into the very fabric of all business activity – now more than ever – and Russian cyberattacks are known to target critical infrastructure. The extent to which a cyberattack could indirectly impact the movement of household goods remains a risk to ports, shipping, and terminal operations.

Lars Jensen, CEO of consultancy Vespucci Maritime, sees a major risk ahead – one that could prolong congestion and keep freight rates historically high for longer because there is little buffer capacity.

The Cost of Fuel

Russia is the second largest exporter of crude oil and the world’s largest exporter of natural gas. Almost immediately as Russia invaded Ukraine, fuel prices in Europe jumped as much as 62 percent in one day. European dependency on Russian oil is at an all-time high with nearly half of its supply coming from Russia.

While the sanctions excluded energy at the time of this writing, if Russia decides to “weaponize” its fuel related exports in response to the sanctions, those sanctions may hurt others more than Russia.

In addition to high fueling costs’ impact on airlines, autos, trains, and shipping; high fuel costs impact industry, home heating bills and raises costs at the local grocery store.

Industry Concerns from Sanctions

Russia supplies the world with a lot of raw materials. It is a major supplier of metals used in car manufacturing, such as nickel used in lithium-ion batteries and palladium used in catalytic converters.

In addition to raw materials, Russia is home to numerous manufacturing facilities. For example, while already reeling from pandemic induced chip shortages and supply chain issues, the auto industry could be impacted by the sanctions on Russia because many global companies have manufacturing hubs in the country and may struggle to operate under the imposed sanctions. The pharmaceutical industry may be similarly impacted.

Be Proactive

NEI continues to monitor the situation and will apprise our clients of any changes. In the interim, we ask that you prepare your companies for the potential costs increases we are likely to face and the continued delays that could very well be heading our way.

Should you have any questions in which we might be able to assist you, please reach out to Mollie Ivancic, VP, International Services or your NEI representative.