A New Cold War? Geopolitics and Specialised Products

The Clash of Civilisations, a thesis written by the political scientist Samuel P. Huntington in 1996, seeks to explain that the conflict between countries and peoples of the world would be down to cultural and religious divides rather than by a political ideology. He asserts that:

“Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilisations. The clash of civilisations will dominate global politics. The fault lines between civilisations will be the battle lines of the future”.

How on earth, do you ask, does this relate to the day to day of shipping markets let alone Specialised Products? Well, the answer may be more obvious than you think. The recent political upheaval in the Ukraine has created perhaps the greatest standoff between the West and Russia since the Cold War ended in the early 1990s. What started as a revolution, spurred by pro-European demonstrators to topple a corrupt Russian leaning government, has since escalated to the threat of war. The western media and senior statesmen have sought to frame the deployment of Russian troops on the Crimean peninsula as tantamount to an invasion whilst President Putin claims he is protecting Russian interests and Crimean ethnic Russians who live there. The economic fallout and global uncertainty this conflict has created caused a run on the Russian rouble and Moscow stock exchange not to mention an increase in the Brent crude oil price as investors worried what any potential conflict would mean for supply. Already we have seen the effects a geopolitical event can have on the world markets.

For ship owners and producers in the Specialised Products markets, the Ukraine and ports around the Crimean peninsula are a major supply of vegetable oils, petrochemicals and not to mention oil and gas. The consequences of a geopolitical threat such as this can have on shipping are enormous. This is evidenced by the event of August last year, when oil prices hit $117 a barrel over the prospect of US involvement in the Syrian civil war due to supply worries. As is well known, any rise in oil price will directly impact on the price of bunkers, thereby escalating overall voyage costs. What’s more the Ukrainian conflict is more than just a matter of bunker and oil price. The businesses of countless traders and producers will be directly affected by any threat of war with any contractual commitments thrown into doubt due to forced plant shutdowns. Owners who wish to trade in the area or are committed to do so will run the risk of invalidating their P&I Club insurance. All of this even before the possible safety of crews and terminal staff is considered. Lastly, as is well known charterers wishing to move cargo through a war zone will have to pay hefty war premiums. War represents a major upheaval to our markets, that much is clear.

All in all, Huntington’s assessment that conflicts will be a clash of civilisations may be a little farfetched but if we really think about the standoff going on at the moment then there might be some plausibility to it. The threat of war over the Crimea will affect us all both personally and in the professional workplace and there is no doubt that it is the ‘West versus the Rest’. All involved in Specialised Products shipping markets will feel the effects of this in some way, whether it be bunkers or a loss of earnings however we should all hope that this does not usher in a new dawn of Cold War era politics!

SP Blog 12 Mar

This entry was posted in Chemicals, Clarksons, Commodities, Shipbroking, Shipping, Uncategorized. Bookmark the permalink.

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