Russia’s invasion of Ukraine has resulted in the widespread ban of Russian exports and financial transactions.
This effectively takes Russia, as well as Ukraine itself, out of the global supply chain loop. It also brings attention to Canadian business links to oligarchs and Russian projects.
The immediate result is supply chain interruptions and price increases.
The consequences of upward costs and delivery delays will add pressure to construction budgets and schedules currently under stress.
The effects of minerals and metal shortages will not be restricted to Europe and will ripple across the ocean to North America as everyone seeks alternative sources of materials already in short supply.
Inflation has been a challenge for construction even before Russia invaded Ukraine. It’s now even worse. When added together, Ukraine and Russia are world leaders in the production of nickel, copper and iron, key materials that have already experienced price increases between 25 and 33 per cent since January 2021. Furthermore, Russia is a major producer of aluminum, also in high demand globally.
In fact, the U.S. Bureau of Labor Statistics’ Producer Price Index reported an overall 24 per cent cost increase in non-residential construction inputs, according to an analysis by the Associated Builders and Contractors. Meanwhile the Wall Street Journal reports that steel mill product prices have increased 113 per cent, plastic construction products 35 per cent, and costs to build streets and highways 20 per cent.
Even if materials can be located, getting them to North America is becoming more difficult and expensive.
Maersk, MSC, Hapag-Lloyd and Ocean Network Express, which together represent more than half of all global shipping, have halted operations out of Russia. Even the transportation of materials from other overseas sources faces challenges due to more complex logistics and delays.
For example, imported shipments of European spruce, pine and fir have reportedly been delayed for weeks.
The economic isolation of Russia is only one technique being used to exert pressure on Vladimir Putin. Another is to target the global holdings of his oligarch friends. These include mega yachts, vacation mansions and real estate and business holdings around the world.
While most of these wealth holdings are in Europe or in exotic sunny locations, there are Russian oligarchs amongst us even in Canada. The problem, as always, is confirming ownership, particularly real estate. The lack of transparency in real estate transactions has made property a favourite hiding place for so-called “dirty money” for years.
However, one prominent friend of Putin, Russian oligarch Roman Abramovich, has ties to at least one Canadian company with known links to Canadian construction.
According to the Financial Post, Abramovich is the largest shareholder of Evraz PLC, a steel manufacturing and mining business based in the U.K. with operations in Regina, Calgary and Edmonton. Other Evraz shareholders include fellow Russians Alexander Frolov, Evgeny Shvidler and Maxim Vorobyev.
Evraz is no small potatoes. The company claims its Regina operation is, “the largest steel company in Western Canada,” recycling steel scrap and producing carbon steel slabs, flat rolled discrete plate and coil. The Post reports Evraz has supplied 250,000 metric tons of pipe for the Trans Mountain Pipeline now owned by the Canadian government.
One individual not on the list of dozens of Canadian-sanctioned oligarchs is Igor Makarov, the largest single shareholder in Calgary-based natural gas producer Spartan Delta Corp. through his stake in Swiss-based Areti Energy S.A.
However, Areti’s PR firm denies any ties to Putin.
Construction-related companies from Canada with business links to Russia are also in the spotlight. For example, SNC-Lavalin currently has a joint venture with Russian oil giant Rosneft. Another is Mississauga-based engineering and development consulting firm Hatch, which has a mining project underway in Russia through its office in Moscow.
John Bleasby is a Coldwater, Ont.-based freelance writer.