Ukraine – one year on: the impact on the marine market and a focus on sanctions

This article was originally published in Maritime Risk, March 2023.

On 24 February 2022, Russia escalated the Russo-Ukrainian war by its invasion of Ukraine. The conflict shows no sign of abating and, as we approach the one-year anniversary of the invasion, we look at how the marine market has been affected over the last 12 months. We also consider the current and anticipated implications of the ongoing war, including the impact of sanctions and the outlook for the next 12 months. 

Market and trade disruption 

The disruption to international trade was instant and widespread, exacerbating problems such as crew shortages, supply chain disruption and congested ports already plaguing the industry as a result of the COVID-19 pandemic. On 15 February 2022, Ukrainian and Russian waters in the Black Sea and the Sea of Aroz were added to the Lloyd’s Joint War Committee’s Listed Areas of perceived enhanced risk and, within hours of the invasion on 24 February 2022, a decision by the Ukrainian authorities led to the immediate closure of the country’s commercial seaports. This curtailment of ship movements in the Black Sea area (the world’s second-largest grain-exporting region in 2021) had an immediate impact on food availability and price.

From July 2022, the Black Sea Grain Initiative led to a limited resumption of Ukrainian grain exports via the Black Sea from three key Ukrainian ports (Odesa, Chornomorsk and Yuzhny). However, as of the end of January 2023, the movement of vessels in and out of Ukrainian waters remains largely limited to those under the Black Sea Grain Initiative and there have been no indications of plans for further ports to reopen nor to expand the scope to other commodities whilst the invasion is ongoing. 

War risk area 

As noted above, in response to the increasing threat to the safety of vessels in the vicinity of the conflict, Ukrainian and Russian waters in the Black Sea and Sea of Azov were added to the Joint War Committee’s Hull War, Piracy, Terrorism and Related Listed Areas on 15 February 2022. This resulted in additional insurance premiums for owners opting to sail into the area.

In a further update on 4 April 2022, reflecting the increased risk as the invasion intensified, inland waters of Ukraine and, more significantly, all of Russia were also added to the Listed Areas. The consequence of this is that additional premiums may be incurred even though a vessel may not be anywhere near the Ukrainian conflict or indeed, any actual war risks.

A number of vessels were caught by the abrupt closure of Ukrainian ports on 24 February 2022. As we approach the 12-month anniversary of the closure, it is anticipated that vessels that have been unable to sail out of the area will look to their War Risk insurers in respect of a potential constructive total loss of the vessel. This will throw up difficult questions over whether, taking into consideration the closure of ports and waterways and the presence of mines, a vessel could have feasibly sailed out.


Despite the fact that the fighting has only been on Ukrainian soil and only involved those two nations, the ‘battleground’ can be said to have extended considerably beyond that. Nations, in particular the US and European states, have not become directly involved in the ground conflict, but have found various other ways to try to combat Russian advances; one of these more effective tools has been the use of sanctions.

The global use of sanctions has increased significantly over the past 25 years and has been an effective method for nation states to exert economic pressure. However, one of the practical methods of operation is that private companies effectively have to enforce the sanctions, because they themselves will face financial and possibly criminal penalties if they engage with sanctioned entities. 

The sanctions imposed against Russia are intentionally wide, complicated and, as we see below, numerous and multiplying. The consequences of COVID-19, perhaps the most disruptive worldwide event in living memory, were still being felt and, as with many industries, the marine market was struggling to revive itself. Whilst sanctions are not a new problem for the market to contend with (Iranian sanctions had dominated the sanctions sphere in prior years), it has become a much bigger challenge to the industry in the last 12 months. 

After the invasion last year, a number of countries responded by promptly introducing a swath of sanctions against Russia, Russian companies and Russian individuals. While the exact scope of sanctions varied from country to country, these largely restricted the trade of certain goods, the provision of certain services, and dealings with designated entities. In addition, sanctions were imposed on a number of Russian financial entities and restrictions on Russia’s use of the international payment system SWIFT severely hampered Russia’s ability to engage in financial transactions. The UK also implemented a ban on Russian ships and jets from UK waters/airspace.

Recent developments

The pace at which these sanctions have developed and been updated has been electric – all those subscribed to any general sanctions updates have been inundated with email alerts. Additional sanctions implemented since the first tranche of sanctions have targeted the Russian energy market, the trade of goods that may contribute to Russia’s military and technological advancement and expanded bans on transactions with Russian entities.

In December 2022, in an attempt to alleviate the global pressure on rising energy prices and reduce Russia’s ability to finance the war with revenues from oil, members of the G7, the EU, Australia and the US capped the price of crude oil originating in or exported from Russia (although the market price for Russian oil has remained at levels below the US$60 per barrel cap since the cap was introduced). However, the EU has recently proposed capping the price of Russian petroleum products (in addition to crude oil) and Western officials hope to agree a deal in February 2023. It is thought a cap on Russian petroleum products will be more effective than the cap implemented on crude oil as Russian producers sought to mitigate the potential impact of the cap on crude oil by processing the crude oil domestically and exporting the resulting product.

As of December 2022, European Member States had reportedly frozen €18.9 billion in Russian assets located in their jurisdictions. The EU has also put forward proposals to criminalise the violation of EU sanctions in efforts to maximise the implementation of the EU’s restrictive measures against Russia.

Future impact of sanctions

The obvious effect of sanctions has been to severely restrict trade of Russian goods and with Russian entities. A large part of the market is no longer (legally) accessible for those engaged in international trade and the shipping industry supporting it. However there are other indirect consequences. Sanctions checking, whilst always recommended anyway, is now much more at the forefront of all businesses and their insurers’ minds. That comes with a cost, both in time and administration.

The consequent effect of that is that often businesses will steer away from doing business that could trigger sanctions, even if the work might ultimately be clear of sanctions. In a similar vein, there has a been a ‘fear factor’ surrounding the sanctions such that many companies will not entertain any Russian related work through fear of sanctions biting - even though upon examination, that work would be sanction free. 

The pace at which the sanctions regimes of various countries are evolving makes it difficult for parties to fully appreciate the risks of ongoing and future transactions. As the conflict continues with no significant gains anticipated in the near future, and in circumstances where other nation states remain unlikely to directly involve themselves in the war (although there has been increased military support), sanctions will continue to be used in order to apply pressure on the Russian state. In the meantime, the marine industry will continue to bear a heavy burden and cost. 

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