By John F Di Leo –
Now that Russia has invaded Ukraine, there is full-scale war in Europe. Russia, Belarus, Ukraine, and possibly also Moldova are fully engaged, with other nearby countries on alert, involving themselves in a way that sometimes appears to push the envelope of neutrality.
We all know what this means in terms of the human cost to people and geography. Shelling, bombing, firing on individuals, businesses, population centers, industrial centers, and other targets, both military and civilian.
Thousands of people have already been killed, and many thousands more, most likely, will die in the weeks and months ahead.
That is of course the most important thing, the human cost. But we all know that; what may not be as obvious is how a war affects other, distant countries and people, and the world at large.
Sanctions and The US Export Controls
Like most other developed countries, the United States has a robust set of laws known as "export controls." These regulations contain restrictions on the countries with which Americans (and their foreign subsidiaries, too) can do business, the entities (individuals, companies, organizations) with which Americans can do business, and the products, materials, technology and information and money that Americans can share with others.
These regulations – on countries, parties and products – are designed to apply American foreign policy to our business community. In a way, these regulations deputize the business community, enlisting every individual and company in the country in the quest to deny our enemies the materials, information, and cash that they might need to pursue war against us or our allies.
These regulations are generally perfectly understood by defense contractors, not quite so perfectly understood by very big businesses, and often highly misunderstood by smaller companies and individuals.
If you don’t sell components directly to the Department of Defense, you are unlikely to have much experience with these rules, but they still apply to you, and you can still go to jail for making mistakes.
Foreign wars, and even threats of war, complicate these matters by adding entities, products, and locations to the otherwise mostly-static list of restrictions. Sanctions, such as those imposed after the Crimean annexation of 2014, and those being imposed now in response to the current invasion, require rigorous attention by every American business, from the smallest manufacturer to your neighborhood bank.
These broadened sanctions will therefore immediately curtail a good deal of America’s international and domestic commerce. As small as the Russian and Ukrainian economies are, compared to ours, they still buy a lot from us, and they still sell a lot to us, from the perspective of the businesses who work with them.
Such interruptions don’t just reduce the sales of the manufacturer of a finished American good; they also reduce the sales by all of that manufacturer’s vendors.
Imagine, for a moment, that you make machines in Illinois, and just three percent of your sales are to Russia and Ukraine. Now that you have lost those sales, for the next year or two, or five, or ten, your purchases from your vendors will also be similarly reduced as a result. Whoever sells you your motors, your cords and dials, your fasteners and ball bearings, your metal stampings, your injection molded plastic components, and all the other small component manufacturers who depend on you… all these companies will also see a proportionate reduction in sales.
For an economy already in freefall, this won’t exactly help.
Transportation and Logistics
We are all familiar with the global supply chain crisis. It has been driven in small measure by the foolhardy Covid-19 restrictions that have so severely hampered shipping and receiving processes all over the world, but it has been primarily driven by the simple fact that international cargo volume has grown at a rate that current infrastructure simply cannot handle.
While airfreight challenges have been more directly related to the China virus, because of the severe reduction of passenger travel, sea freight challenges have no such relation.
For forty years, containership companies responsibly grew their fleets to meet the growing cargo demands of a world economy growing by leaps and bounds. 1500-container ships were replaced by 3500-container ships, then 8000-container payloads, then 12,000-container payloads. Ships now hold 20,000 or more 20’ containers each. That's how much sea cargo has grown worldwide.
Recognizing this, the Panama Canal spent the money, and did the work, to grow in a way that will help it accommodate this increased volume. It wasn’t a secret. Anyone with eyes, all over the world, could see that ocean cargo volume was skyrocketing, and that infrastructure would need to grow to accommodate it.
Unfortunately, as usual, government failed in every way, especially in America. American seaports, primarily operated by local and state authorities – with the considerable input of longshoremen’s unions and the shipping lines, failed to even attempt to accommodate this continuous growth in volume.
Year after year, the carriers would call for port expansion and increased automation, to help each port handle this ever-growing volume. Year after year, the unions have resisted it, fearing that this growth would cause them to lose jobs. And year after year, the port authorities have been happy to tinker around the edges, adding a berth here and there, adding a railroad or highway spur here and there, but none of them taking the steps needed to double or triple their capacity and accommodate the massive growth that was undeniably ahead of them.
Politicians like Joe Biden foolishly try to blame the shipping lines for the bottlenecks in our sea ports and our inland rail yards, but the attempt is fruitless. This is a visible, undeniable failure of government-run ports and government-regulated railroads.
And so it is that we arrive at this moment, already suffering unprecedented cargo delays and transportation costs, when war appears on the horizon.
Transportation and the Russia/Ukraine war
Global commerce flows. That's what it does. It moves. It does not stand still.
Once vegetables are harvested, they are sent on their way. Once goods are manufactured, they are shipped to the next stage of the process.
Cargo is always in motion, either on the road and the rails, or in the air or on the sea… Or undergoing the cross-docking operation of a transportation terminal, as it moves from one transportation mode to the next, from one country to the next, from one manufacturer to a distribution center, from that distribution center to its final customer.
War stops that process.
All over the world, there is cargo already produced, ready to ship into the war zone. And it must now stop, and stay where it’s at, filling up space at the factory or storage facility. Factories, distribution centers, and other terminals, all over the world, already full from the ongoing supply chain problems, must now reserve some space for this paused cargo, which will now be their problem, for… who knows how long? A month? A year? ten years? Nobody knows.
Similarly, last week, much of this cargo was on board ship, sailing the seven seas. Maybe just 20 or 30 containers out of a 1500-container vessel… or just 50 or 100 containers, out of a 5000-container vessel, perhaps. It may seem like a small percentage.
But in the weeks to come, these tens of thousands of containers, that can no longer reach their destinations, will be unloaded at the world's seaports, to sit out the war.
Rotterdam, Bremerhaven, Hamburg, La Havre, these are the biggest ports serving the war zone. But they serve lots of other areas as well, and now they will be congested, all the more, by the bottleneck of Ukraine-bound, Belarus-bound, Russia-bound containers.
You have heard or read the tales of Seattle, Los Angeles, Vancouver, Long Beach, all of which have been congested by tens of thousands of containers more than they could hold. Now watch that same problem happen in Rotterdam, Bremerhaven, Hamburg, and Le Havre… and more. Those aren’t the only ones. There are plenty of other, smaller ports, that also serve the war zone.
But these are the biggies. And not just for Ukraine and Russia, but for us as well.
Americans ship to and from those northern Europe ports every day. We import from Europe, we export to Europe; we ship internationally with those European ports as the transshipment points on countless global routes.
And this war has made the ongoing supply chain crisis worsen.
On top of all this, there will be the more complex war-time shipping disruptions of military hardware as the border nations take precautions for themselves. There will be the aid cargo: thousands of containers of clothing, bottled water, food and drink for the refugees and other sufferers in and near the war zone, moving by both sea and air.
This is complicated, from a logistics perspective, even in the best of times. It will be a nightmare today.
Expect lead-times across-the-board to increase. Expect transportation costs to skyrocket yet again.
And for us here in the United States, yes, expect us to suffer as well. America is the engine of the world. When the rest of the world suffers, it slows us down. When we suffer, we make the world suffer even more.
Every job that’s lost due to lost business caused by this unnecessary war adds to the unemployment problem, and therefore the ballooning cost of the welfare state, and therefore the government’s long-term debt.
Every 40,000 pounds of petroleum, that has to move in a truck because some idiot shut down a pipeline, clogs up the transportation network even more.
Every state that recognizes the need to expand its seaports, but cannot afford to, because it has to spend billions of dollars dealing with the flood of illegal aliens, must admit that the cause is our corrupt government’s refusal to guard our borders.
The state of our nation, and the state of our world, are jeopardized by poor policy and corruption, all the way from the local level to the international.
And when mistakes are made in state and national capitals, from kicking the can down the road by postponing port expansion until later, to poking the Bear by issuing veiled – and not-so-veiled NATO-expansion invitations to critical buffer states, most of the world’s problems today, as every day, can be traced to big, foolish, thoughtless, arrogant Government.
Copyright 2022 John F Di Leo
John F. Di Leo is a Chicagoland-based trade compliance trainer and transportation manager, writer and actor. A one-time county chairman of the Milwaukee County Republican Party, he has been writing regularly for Illinois Review since 2009.
A collection of John’s Illinois Review articles about vote fraud, The Tales of Little Pavel, and his 2021 political satires about current events, Evening Soup with Basement Joe, Volumes One and Two, are available, in either paperback or eBook, only on Amazon.
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