Seatrade Maritime: Shifting geopolitical blocs to reshape supply chains

Fundamental changes to global supply chains are expected to be driven by further geopolitical tremors as powerful regional players demarcate their spheres of influence.

Donald Trump’s military operation in Venezuela is seen as the US pushing back on China’s rapid spread of influence across the globe.

This change of policy is not something that has happened overnight, according to Peter Sand, chief analyst at freight intelligence platform Xeneta, it has been in the making for decades as China has spread its influence, he said.

“They [the US] have been looking at China’s Belt and Road for a decade now and they may not have taken it that seriously, but all of a sudden they see China’s sphere of influence is not just about producing cheap toys, it’s about investing and connecting large parts of Asia, the Middle East and Africa as a supporting band,” explained Sand.

Venezuela by itself will not change things, he added, but Washington is looking to “correct what it has seen slip away,” in terms of global influence, and the methodology for that correction is “very unusual”, added Sand.

America’s response to Beijing’s fast expanding influence has been a return to the 19^th century Monroe Doctrine, named after President James Monroe, which sought to stymie European imperialism.

Resurrecting a 200-year-old ideology, albeit with the modern moniker of the Donroe Doctrine, could ultimately see the world divided into spheres of influence, with east Asia led by China, western Europe led by the EU and eastern Europe by Russia while the US controls the Americas.

In Latin America, the influence of the US on its politics and economics has continued to be a factor. Since the second world war US military interventions have taken place in Cuba, Chile, Nicaragua, Grenada and Panama and now there are threats against Columbia, Mexico and Cuba again, with Greenland, a NATO ally, also in the crosshairs.

Given the historical precedents and the apparent discarding of international laws by the US in its attacks on Venezuela and its shipping, there has been a shift in the relationships between governments and their economies.

Martín Guzmán, a former minister of economy of Argentina, is a professor at the School of International and Public Affairs at Columbia University, said: “Fragmentation is no longer an emerging risk but an organizing principle.”

Writing in the economic and political publication Project Syndicate Guzmán argues that globalisation has been “reconfigured around national-security priorities” and that trade and supply chains are now being modelled around competing geopolitical blocs.

“Against this backdrop, the debt vulnerabilities of developing economies will play a growing role in how they position themselves between the US and China. The Trump administration, in particular, is treating financial arrangements and trade agreements as instruments of statecraft,” said Guzmán.

As a consequence of that fragmentation Şebnem Kalemli-Özcan, professor of economics at Brown University, argues that globalisation is about to become more unequal.

“Supply chains will grow longer and riskier, while the technological arms race between the US and China could destabilise the global economic system,” writes Kalemli-Özcan.

Venezuela has eight services serving Valencia and Caracas feedering into Colon in Panama or Kingston Jamaica, according to Xeneta data, said Sand. In total the country’s container volumes have slipped from 1.57 million teu to 500,000 teu in 2019, this will not have a major impact on container shipping.

Sand believes that any changes to the governance of Greenland could be “disregarded” by container shipping businesses too, with the number and intensity of uncertainties reducing this year, making 2026 “a less crazy year”.

Having said that Sand concedes that if Panama were to be impacted through the Donroe Doctrine the impact on container shipping would be far greater, and that risk is far higher today than it was before the attack on Maduro and Venezuela.

According to Sand, the US is fighting two different geopolitical wars, one against China and the other against its European allies. The EU is a larger economy as a single unit than the US and the US would prefer to see that broken down to individual states that it can control, as with Venezuela.

Container shipping reacts to the geopolitical realities, and that is necessarily behind the curve, as the economic landscape shifts around them and that is reflected in the ordering of is vessels, according to Sand.

According to Sand there has been a shift in the container ship orderbook over the last few years.

“Carriers are acting in a world which is not full throttle on globalisation and the integration of global supply chains, but the interest in orders are more about the mid-large sizes, from 10,000 teu to 16,000 teu, and not just 24,000, that’s testament to the fact that lines are looking at more complex supply chains going forward,” concluded Sand.

Liner operators are looking at calling at secondary ports not just the main ports in China, Europe and the US and they need more flexible tonnage in their operational capacities, said Sand.