Recently, the public got thunderstruck by a report that went viral about a cargo ship that got stranded in the Chesapeake Bay. On March 13, 2022, the Ever Forward ship, a fleet member of the Evergreen Marine Corp. reportedly got stuck in the shallow waters of Chesapeake Bay. According to NPR, Ever Forward was departing from Baltimore after loading their cargo when the crew miscalculated the ship’s navigation. Eventually, the Ever Forward arrived in Chesapeake Bay and was stuck in shallow waters near the beach for four weeks. Various efforts have been made to set this cargo ship free so that it will be able to sail as per normal in accordance with the trade routes. However, until this exact day, the ship still shows no avail of going back on the sail and still remains stranded in the Chesapeake Bay.

Although it did not cause any loss and damages to other cargo ships, this incident caused delays in the supply of raw materials and products of essential commodities for life due to the time-consuming ship rescuing attempts. As reported by CBS News, the Ever Forward ship currently wields 5000 containers on the deck and by being stuck in the same position for a month, they have caused a loss of 1 billion USD per day. In order to avoid a greater amount of loss, the crew and the Chesapeake Bay coastal guards took the initiative to evacuate the containers using another ship for immediate distribution to respective recipients.

The incident that happened to Ever Forward again made the public aware that maritime transportation is crucial in supporting export and import activities in trade. Export and import activities are essential processes in international trade to channel the produced commodities to consumers in order to meet their daily needs. To make the whole process more efficient, transportation facilities are required, especially sea transportation which has been deemed to be the most efficient transportation for various types of products at the same time.

Quoted from a press release on the UN's official website, Former UN Secretary General, Ban Ki Moon conveyed the importance of maritime transportation in the realm of international trade in his speech on September 29, 2016, coinciding with World Maritime Day. Ban Ki Moon stated that maritime transportation is the backbone of global trade activities. Maritime transportation helps ensure that the benefits of trade are more evenly distributed due to its large capacity and relatively lower costs compared to other types of transport. In addition, the shipping industry has also played an important role in the improvement of global living standards that have brought millions of people out of acute poverty in recent years. This article will discuss further about the importance of maritime transportation in the world of international trade.

Importance of Maritime Transport in Trade

Barely any economic activity and industrial sector in the world can last for an eternity without the involvement of maritime transport in their export and import activities. This statement was reinforced by the International Chamber of Shipping (ICS) which explained that the international maritime transportation industry is responsible for the transportation of around 90% of commodities produced from world trade activities. In this figure, 80% of them are commodities destined for export and import activities. The statement implies that trading activities are completely dependent on sea transportation which is an important component to drive their economic activities.

ICS also stated that among the 90%, there are 11 billion tons of commodities transported by cargo ships every year, of which 1.5 tons represent the necessities of life for every single person in the world per year. Every year, the shipping industry transports nearly 2 billion tons of crude oil, 1 billion tons of iron ore, and 350 million tons of wheat, where these raw materials are the basic ingredients of almost all basic human needs such as clothing, food, and shelter. This proves that a person's survival is highly dependent on world trade activities, especially on the process of export and import through maritime transportation.

In addition, ICS also mentioned that currently, there are more than 50,000 international cargo ships that carry every type of commodity in their cargo capacity. There are 150 countries in the world that have a fleet of registered cargo ships as a means of distributing commodities in the economy. In addition, each existing fleet employs more than one million human resources from almost every country. The statement elaborates that the maritime transportation industry in expedition activities is strongly supported by its existence to keep world trade activities alive.

What Happened the Year Before

During this year, the world of commerce and the general public was shocked by news about cargo ships that got stuck in the waters where they sailed. Prior to the stranded incident of the Ever Forward ship in the Chesapeake Bay, there was an incident that happened to another Evergreen ship, where this incident was considered far more fatal. Reporting from The Washington Post, at the end of March 2021, one of the Evergreen Marine Corp. ships, Ever Given, was reportedly caught in the Suez Canal which caused a blockade of the canal for 6 full days. The blockade caused by the snagging of the giant carrier managed to disrupt the shipping activities of more than 300 ships, so that some ships were forced to take alternative routes, requiring them to circle the African continent to reach Asia and increase their sailing time by three weeks.

Reporting from CNBC, the amount of losses borne by Evergreen Marine Corp. After experiencing this incident, of course, not a few, because not only their companies suffered losses, but also the economy around the world. Despite paying a fine that includes compensation for damage and loss of revenue for the Suez Canal, as well as rescue costs totaling $916 million, Evergreen Marine Corp. cannot immediately restore the state of world trade as before. The losses caused by the entanglement of Ever Given to the world economy did not only last a day or a week after that, but the impact was felt for months.

According to Business Insider, the losses caused after the Ever Given snagged were estimated at 400 million USD per hour. Lloyd's List, a shipping news journal based in London, estimates the value of cargo goods passing through the canal daily at an average of 9.7 billion USD, with a total of 5.1 billion USD moving into the western hemisphere and 4.6 billion USD moving into the western hemisphere. moving to the eastern hemisphere. Multiplied by more than 300 other cargo ships, of course this number of losses is not something trivial. This event affects global supply chains that have been struggling with shortages and delivery delays since the pandemic began in 2020.

Maritime transportation is the best transportation option for distribution activities in world trade in terms of its function. As the main driver of commodity distribution activities in international trade, human needs are almost entirely dependent on the smooth running of the process. However, if trading activities involving maritime transportation are disrupted while carrying out their functions, the losses incurred will be fantastic. In the future, maritime transportation companies must be better prepared to face situations that can endanger international trade flows.

Illustrated By Marsha

The Russian-Ukraine conflict has reached a new phase in recent weeks. Russian President, Vladimir Putin, has deployed the military personnel into Ukraine’s territory in order to implement what is being called a “demilitarization” and “liberalization” action for some of the Ukrainians. Instead of gaining military support from NATO (North Atlantic Treaty Organization), Ukraine President, Volodymir Zelensky, questioned the commitment of NATO members and also the US to support Ukraine to defend its territory, especially militarily. Hence, it is interesting to examine the unwillingness of NATO and the US to support Ukraine to defend its territory militarily and choose to utilize economic sanctions such as banning Russia’s access to SWIFT (Society for Worldwide Interbank Financial Telecommunication) and freezing Russia’s central bank assets.

Aside from the humanitarian, geostrategic, and security issues that are debated in this conflict, the energy trade relationship, particularly the gas trade relationship, between Russia and European Union countries cannot be overlooked from the discussion of the Russia-Ukraine conflict considering the majority of  European Union members are NATO (North Atlantic Treaty Organization) members which rely on Russian gas supplies.

The dependency of European countries, particularly those who are members of NATO and the European Union, on Russia’s gas supply is quite large which accounts up to one-third of the security pact members' consumption. According to the data, Germany, considered one of the powerful states in NATO, depends more than its 50% national gas supply from Russia (Wilkes et al., 2022). Besides Germany, France and Italy also rely on Russian gas supplies to import 25% and 45% of their total national gas consumption. Furthermore, countries such as Bulgaria, the Czech Republic, Estonia, Hungary, Poland, and Slovakia import 75% to 100% of their gas supply from Russia.

The topic of energy security, notably gas supplies from Russia to several NATO members, becomes significant in addressing both sides' relationships. Unlike petroleum resources, the cost of transporting gas by tanker is high. As a result, supplying through pipelines is more efficient and less expensive. Therefore, changes in the selling prices to the cessation of natural gas supply by the primary gas supplier, Rusia, will cause distress to the consumers such as countries in Western Europe to switch to other energy sources. According to Cohen and Reed, the dependency on Russian gas become one of the main challenges for NATO to impose severe sanctions on Russia (Cohen & Reed, 2022). The supply of natural gas that continues to flow to NATO nations, when the Russian army entered Ukraine, may lessen the impact of the US-led economic retaliation to stop President Putin from aggression against Ukraine. On the other hand, NATO members must guarantee that decreasing or even canceling Russia's gas supply does not have a worse impact on European Union countries. 

The crisis between Russia and Ukraine demonstrates another key aspect of comprehending international relations. Instead of strengthening relations between the two parties, European Union and Russia, in accordance with dependency theory which argues that economic interdependence can reduce mutual distrust, the parties' reliance on energy supplies does not appear to be improving their relationship. Krickovic further contends that, in addition to perpetuating the region's security challenge, the energy trade might be used as a weapon to acquire each party's benefit (Krickovic, 2015).

Understanding the relationship of both parties, energy trade becomes political leverage to gain their interest. The European Union's dependency on energy from Ukraine becomes one of the most influential aspects in determining the security policy and response to Russia’s attack on Ukraine territory. On the other side, Russia is also depending on the income from exporting gas to European Union states. More than 70% of its gas export is transferred through the gas pipelines to European countries. Therefore, although these parties' energy trading connection is arguably advantageous economically, the reliance of certain NATO members on energy provides Russia with greater political leverage to exert its interest in the region vis-à-vis NATO.

According to Baran, the amount of energy dependence on Russia causes some of the NATO member's foreign policy to be not independent because it provides a large portion of the calculation of energy dependence on Russia (Baran, 2007). On several occasions, Moscow frequently utilizes the energy leverage as its political leverage, particularly to compel its neighboring countries to act in Russia's best interests. If its neighboring nations fail to meet Russia's interests, Russia will utilize numerous arguments connected to energy supply failure to halt energy flow to the neighboring countries and also sometimes seem manipulative as it did to the Balkan countries. Arguably, it is worrying for some NATO countries to act harshly over the Ukraine attack.

In response to Russia's military war on Ukraine, Germany has halted the critical Nord Stream 2 pipeline project, which was officially announced by Germany's Chancellor, Olaf Scholz (Eddy, 2022). Nord Stream 2 project was approved by the German government in 2018 and is scheduled to be operated in early 2022. According to many observers, the realization of this project would undoubtedly enhance not just the countries’ reliance on Russian gas supplies, but may also fracture political unity in responding to Russian aggression. For Germany, halting the implementation project is also perceived as a daring decision for a nation that depends almost on its half of energy supply from Russia.

However, some observers argue that the termination of the Nord Stream 2 project is inadequate to stop the Russian attack on Ukraine. Despite imposing economic penalties on various aspects, such as excluding Russia from SWIFT and international trade, NATO countries' reliance on Russian energy supplies compels them not to restrict Russia in the energy sector, which is one of the sectors that might harm Russia's economy more severely. It will be too risky for sanctioning Russia in the energy sector which might imperil the European energy supply and security. Therefore, in the context of developing conflict in Ukraine, it is not impossible for President Putin to exercise its energy leverage to achieve his interest and counter the sanctions made by the West on Russia's economy, even though this strategy has not been used.

Seeing some of NATO members' energy vulnerability towards Russia, it is arguably the utmost interest of these nations to reduce the energy supply dependency from Russia. Besides seeking other parties, these nations might accelerate renewable energy to fulfill the energy demand in the foreseeable future. This is expected to provide a wider space for NATO countries in carrying out their foreign policy. The development of renewable energy in European Union and NATO members have accelerated incrementally over the past decades yet still unable to fulfill the energy demand in the region.

In sum, it is crucial for the NATO members to diversify their energy suppliers and accelerate the alternative energy resources to reduce the dependence on Russian energy. According to Krickovic, diversifying the energy resources and suppliers might benefit NATO members to shape its foreign policy and strategy more independently vis-à-vis Russia's aggression in Ukraine. However, as NATO Secretary-General Jens Stoltenberg stated, the transition to renewable energy will take some time and propels the countries to increase the fund for accelerating the transition to renewable energy but it should be done immediately (Maclellan & Rodionov, 2022).

References

Baran, Z. (2007). EU Energy Security: Time to End Russian Leverage. The Washington Quarterly, 30, 131–144. https://doi.org/10.1162/wash.2007.30.4.131

Cohen, P., & Reed, S. (2022, February 25). Why the Toughest Sanctions on Russia Are the Hardest for Europe to Wield. The New York Times. https://www.nytimes.com/2022/02/25/business/economy/russia-europe-sanctions-gas-oil.html

Eddy, M. (2022, February 22). Germany Responds to Russia, Halting Nord Stream 2 Pipeline. The New York Times. https://www.nytimes.com/2022/02/22/business/nord-stream-russia-putin-germany.html

Krickovic, A. (2015). When Interdependence Produces Conflict: EU–Russia Energy Relations as a Security Dilemma. Contemporary Security Policy, 36(1), 3–26. https://doi.org/10.1080/13523260.2015.1012350

Maclellan, K., & Rodionov, M. (2022, January 30). NATO concerned over Europe’s energy security amid standoff with Russia. Reuters. https://www.reuters.com/world/nato-calls-europe-diversify-energy-supply-amid-standoff-with-russia-2022-01-30/

Wilkes, W., Dezem, V., & Delfs, A. (2022, March 5). Germany Faces Reckoning for Relying on Russia’s Cheap Energy. Bloomberg.Com. https://www.bloomberg.com/news/articles/2022-03-05/germany-faces-reckoning-for-relying-on-putin-for-cheap-energy

Illustrated By: Marsha

As per report made by The White House's official website, on March 9, 2022, the United States (US) President, Joe Biden, signed an executive order relating to the phenomenon of the circulation of cryptocurrency as a digital asset. In the warrant, Joe Biden directed the US government to study the characteristics of cryptocurrencies, further examine the risks and benefits of these currencies to the economy, and then formulate regulations and policies to monitor the trading activities of these digital assets. At the present time, at least more than 40 million US citizens invest in digital assets, including cryptocurrency. Therefore, it’s about time for the US Government to establish policies that have sufficient power to regulate trading activities of cryptocurrency. With the issuance of this executive order, the US government has provided support for transactional activities related to cryptocurrency assets that are increasingly in demand by the public in the digital era.

This news reaped various positive responses from experts and also cryptocurrency trading enthusiasts from the US. These people perceived the executive order from President Biden as one of the prominent upgrades in the realm of digital asset trading the government can establish. According to Investopedia, cryptocurrencies or “crypto” are virtual currencies that are secured by a cryptographic system, which makes it almost impossible to counterfeit or duplicate, and all transactions will be recorded on the blockchain as a data storage ledger. Currently, most cryptocurrencies are not issued by any central authority, making them theoretically immune to government interference or manipulation.

The phenomenon of the skyrocketing popularity of using cryptocurrency in the digital era is still relatively new, therefore the public is extremely enthusiastic about welcoming the government's participation in the cryptocurrency sector which can bring various benefits into it. In the US, numerous cryptocurrency users have already made advanced use of this virtual currency as a tool for casual transactional activities as in the initial function of physical dollars. Some of the noted positive effects from President Biden's executive order that can possibly occur in the future include:

1.Increase in Cryptocurrency’s Price and Value

Biden’s decision to sign the executive order concerning the cryptocurrency trading activities has made a visible impact at this present time. Reporting from Channel News Asia on Thursday, March 10, 2022, the price of Bitcoin rose dramatically to 9.1% after the issuance of the order. This dramatic increase has reached its apotheosis, higher than most peaks made from February 28, and managed to reach US$42,280 or equivalent to IDR 605,978,100. The same thing happened to Ethereum which experienced a price increase of 6.32% to US$ 2,715.47 and also other cryptocurrency assets that experienced price increases simultaneously.

The escalation in the price of cryptocurrency assets will automatically affect their value. With a significant increase in cryptocurrency prices, these digital assets will gain a strong reputation in the community as a high-potential commodity. As a result, people will grow attentiveness gradually in the activity of trading cryptocurrency assets. Investors and other related parties who are actively involved in cryptocurrency trading activity are the ones who will gain the most advantage, concerning their possibly thriving incomes in the future.

2. Maximizing Protection and Risk Mitigation

Through the executive order issued, Biden directly urged the Financial Stability Supervisory Board to identify the financial risks that may occur in cryptocurrency trading activities and consider the risk mitigations to minimize the occurrence of dangers. Supervision of digital currency transactional activities will also be enforced in order to create a space for safer trading activities so that all consumers, investors, and other parties involved can have more convenience in conducting transactions. The agency also got directed to minimize the occurrence of embezzlement and laundering of funds with crypto assets by irresponsible parties. Enforcing regulations for future transactions will protect customers and crypto investors from fraudsters and cyber-attackers who can cause them to lose large amounts of assets.

3. Promoting Technological Growth in Financial Matters

In this all digitally driven era, the US Government strives to continue carrying out innovations on digital technology in various sectors to a greater extent, specifically in the financial sector. The existence of digital currencies signifies the advancement in technology destined for the financial sector. By conducting further research on cryptocurrency trading, the US Government has made a prodigious milestone to develop the financial sector’s supporting technologies. The US government is expected to have the capability to establish a digital trading environment that escalates the country’s competitive values in order to compete with other first-world countries and be capable of becoming a pioneer in digital asset trading technology.

The development of technology in the financial sector by the US Government is also crucial for security and convenience enhancements in cryptocurrency transactional activities in the digital realm. Blockchain technology is a perfect epitome of technological upgrades, which have the capability to store transactional data that are unalterable and customizable for public visibility. With the existence of blockchain, the reprobates who often embezzle their financials through digital currencies will have to think twice when carrying out their maneuvers. Consequently, cases of embezzlement and fraud in digital transactions may be drastically reduced.

Beside the positive impacts, there are potential challenges for the development of cryptocurrency in the US to be faced in the future. In formulating policies that regulate the digitalized currencies' transactional traffic, the US Government is expected to think about all challenges that have possible occurrences in the future. One of them is social inequality that can be caused by digital currency transactions in the present time and in the future. In an executive order by Biden, equality of access and easy financial services at affordable prices is one of the discourses that they aspire to be realized, despite being contradictory to the skyrocketing price of cryptocurrencies. The high price of some digital currencies, such as Bitcoin, also makes it inaccessible to people from the lower middle class and makes it only accessible to the upper-middle class. This will concerningly form a perception between the rich and the poor in the community, where people will perceive that only the riches can have the access to cryptocurrency and could happen otherwise.

In addition, another upcoming challenge is the security of the personal data of users of the digital asset trading platform that are vulnerable to numerous risks. According to Epiq Discovery, trading activities in the digital realm require users' personal data inputs so that transactional activities can run smoothly. Moreover, blockchains can be concerning as they have records of all traces of users’ transactions alongside their personal data. Their nature that can be visible to the public can put the personal data of users at risk of being leaked at any time. Furthermore, the risk of data theft in the blockchain by hackers is still possible even though there are claims that the blockchain system is very difficult to hack. Therefore, the security of personal data and privacy must be guaranteed by the government after the policy is formulated.

Ilustrasi oleh: Marsha

Monday (28/2/22), the Russian currency, the Ruble, was observed to have fallen drastically. The ruble plunged into 106.01 per dollar in Moscow and closed Wednesday (2/3/2022) at 106.02 after hitting a record intraday low of 118.35, recording a drop of more than 10% on the day. This decline is a result of the war that occurred between Russia and Ukraine, where countries in the world impose economic sanctions on Russia. A series of sanctions in the form of blocking major Russian banks from the international payment system or the Society Worldwide Interbank Financial Telecommunication (SWIFT)––a system that migrates billions of dollars from thousands of banks and other financial institutions around the world––comes from large and superpower countries, such as the United States and Europe. The impact of this blocking has prompted old Russian investors to seek new investment asylum to new safer zones, namely the yen and the US dollar.

In addition to the Ruble's fall, shares in major Russian banks also slumped as a result of sanctions imposed by western countries. Share price of Sberbank––Russia's largest lender––down 95% on the London Stock Exchange on Wednesday (2/3/22) to trade at $0.01. This fall marked the lowest point in Sberbank's share price which led to its withdrawal from the European market. A spokesman for Sberbank stated that it, in particular its European subsidiaries, had experienced abnormal cash outflows following the Russian invasion of Ukraine. Apart from Sberbank, major Russian stocks, including Novatek, Lukoil, and Rosneft, also experienced similar declines. In order to stabilize financial markets, the Central Bank of Russia intervened in the foreign exchange market and also expanded the Lombard list. Apart from Russian stocks, global stocks also experienced a similar decline to the Jakarta Composite Index (JCI), where the JCI recorded a fall into the red zone with a decline of nearly 2% on Thursday (24/2/22). US stock markets were also sluggish, with the Dow Jones Indus AVG, S&P 500 Index to Nasdaq Composite slumping.

The sharp devaluation undergone by the Ruble has the potential to cause inflation and will most likely result in a bad impact on the Russian population who are likely to be suffocated by the prices of the soaring goods. Prices for homemade products, which are mostly imported, will skyrocket and the cost of traveling abroad will increase. In addition to inflation, the stock market could be in danger of closing. This economic downturn could also affect Russian military operations, with possible pressure on the smooth running of the operation. Russia's internal economic turmoil is expected to worsen shortly as the ruble's slumping value and falling stock prices forced supply activity to stop as a result of low demand.