Michael Walsh, partner with the law firm of Foley & Lardner LLP, discusses the impact on supply chains to date arising from Russia’s invasion of Ukraine, and what further effects companies might experience in the months to come.
There have been some major disruptions to U.S. supply chains as a result of Russia’s invasion of Ukraine, “but not as many as one might think,” says Walsh. U.S. exports of manufactured goods to Russia were never that strong in the first place, and a number of companies that were doing business in Russian prior to the invasion “have just pulled up stakes and walked away.”
The most serious supply chain disruption right now is the cutting off of exports of grain from Ukraine, especially to Africa. In Europe, buyers of Russian oil are scrambling for alternative sources. In that respect, “there will be downstream effects,” says Walsh. “I don’t know that they’re being acutely felt right now.”
Russian industry is suffering, he says, especially in the country’s automotive sector, which is lacking critical parts from manufacturers in the West. Also lacking are components needed to support Russia’s oil drilling sector. And the country has been seriously hindered by the shutting down of payment methods through western banks.
U.S. exporters to Russia still must be aware of the various sanctions in place that could affect them, and might be liable for penalties if their products end up in Russian hands, even if the initial buyer had no visible ties to those individuals. Walsh says industrial and tech sellers will have to adopt the due diligence methods of military suppliers, who have long been required a take special care that their products don’t get to sanctioned purchasers. Companies are taking that obligation “very seriously,” he says. “U.S. companies are paying attention to the issue and buckling down.”
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