The ongoing conflict between Russia and Ukraine is having significant impacts on global supply chains and procurement, including those in Australia. As one of the world's leading exporters of natural resources and a significant importer of goods and services, Australia is not immune to the effects of the conflict. We feel this through inflation that is proving to be difficult to control, at the bowser and in our everyday goods. In this article, I would like to explore some of the impacts of the conflict on Australia's supply chain and procurement activities, both current and ongoing.
Disruptions to Energy Supplies
Russia is one of the world's largest exporters of oil and natural gas, and any disruptions to its exports have had significant implications for global energy markets. Australia is a major importer of oil and gas, and any disruption to supply has led to increased prices for Australian consumers, businesses, and government expenditure for things such as fuel for vessels and the aviation sector. While Australia has a diversified energy mix, any significant increase in energy prices has had a ripple effect across the entire economy. This has resulted in increased contract expenditure for commodities with follow-on implications to government expenditure, further, the lack of price certainty is complicating procurements for fuel to facilitate national security activities.
Impact of Commodities Markets
Russia is also a significant exporter of a range of commodities, including metals and minerals. Disruptions to its exports and its ability to engage globally have led to increased prices for these commodities. Often these are the raw materials that are used in the production of goods, of which Australia is a significant buyer. Further, the mining industry is a key contributor to the Australian economy, and disruptions to commodity markets have had a significant impact on the sector. While Australia is working to capitalise on the opportunity to diversify its commodities with the green "green revolution", the declining exports of Russia's commodities have had impacts on key trading partners and allies, thus impacting Australia.
Increased Risk and Uncertainty
The conflict between Russia and Ukraine has created significant political-economic uncertainty, which has implications for the global supply chains and procurement. The conflict has led to increased sanctions and trade restrictions, which impact Australian businesses that rely on imports from Russia or exports to Russia. Additionally, the conflict has led to increased geopolitical risk and arguably has caused a general destabilisation which will make it more challenging for Australian businesses to navigate global markets.
Opportunities for Australia Suppliers
While the conflict between Russia and Ukraine has created significant challenges for global supply chains and procurement, it has also created opportunities for Australis suppliers. As businesses look to diversify their supply chains and reduce their reliance on prime suppliers, there could be opportunities for Australian suppliers to step in and fill the gap. Additionally, the conflict has led to increased demand for certain commodities, such as gas, which will benefit Australian suppliers.
In conclusion, the conflict between Russia and Ukraine is having significant impacts on global supply chains and procurement, including those in Australia. Disruptions to energy supplies, impacts on commodities markets, disruptions to shipping and logistics, increased risk and uncertainty, and opportunities for Australian suppliers are all potential impacts of the conflict. While the full extent of the impact on Australian businesses and the economy remains to be seen, it is clear that the conflict will have significant implications for global supply chains and procurement activities for the foreseeable future.
There is no one way to mitigate these impacts, however, the continued push to prioritise Australian industry, coupled with incentives to innovate and advantage Australian suppliers will assist procurement officers in the Commonwealth to show the value for money that can be provided by Australian suppliers.
Saskia Keenan co-leads the Strategic Sourcing team within Synergy Law. After an extensive public service career in a range of Agencies. She has worked extensively in international engagements and holds a range of qualifications, including a Masters Degree in International Relations. Saskia has a keen interest in Russia, with her studies focusing on Russian and Middle Eastern relationships in a globalised world.
