Russia-Ukraine: Crisis poses great risk to global supply chains

The brutal Russian incursion into Ukraine signifies a dramatic shift after decades of stability, violating fundamental principles of democracy and rule of law, with severe ramifications for millions of livelihoods. CLEPA is closely following the latest developments and gathering intelligence and information to assist the supplier network. A first round of inquiries among our members has shown that their principal concern, as with any crisis, regards the people directly implicated, their safety and well-being. 

 Several dimensions of the mobility ecosystem are currently being affected, including the global automotive supply industry. Some member companies have production plants in Ukraine or rely on operations in Russia for part of their work. The industry is therefore seeing impacts in production, workforce, trade, and cross-border mobility of people and goods.  


 The automotive sector in Ukraine and Russia in numbers 

Ukraine’s automotive sector is mostly located in the western part of the country, with clusters predominantly focused on the manufacturing of wiring and cables, and production for the aftermarket. Seven European and several international suppliers have manufacturing facilities in the country. In 2021, imports of auto parts into the EU from Ukraine totalled €23.3 million, and given the clear focus on wiring and cables, we are seeing short-term disruptions, as recently announced by Volkswagen and Skoda. Exports to Ukraine totalled €855 million, making it the 42nd export destination for EU automotive suppliers.  

Russia has a significant automotive sector, employing around 600,000 people, roughly 1% of the country’s total workforce. Several OEMs have a strong presence in Russia, mainly Hyundai and Kia but also Stellantis, Renault and Toyota, with 34 automobile assembly and production plants in-country. More than 30 European suppliers have facilities in the country and foreign direct investment by European suppliers between 2010 and 2021 totalled €2.3 billion. Russia produced 1,767,674 vehicles in 2018, ranking 13th among car-producing nations, and accounts for 1.8% of the worldwide production.

Existing sanctions since 2014 have limited business operations for many suppliers, and consequently, the degree to which Russia is integrated in the global supply chain. However, the size of the domestic market has sustained a significant supplier presence. Russia is highly dependent on imports of auto parts. For comparison, imports of auto parts into the EU from Russia totaled €113 million in 2021, whereas exports to Russia totalled €3.2 billion, making it the 5th biggest export destination for EU automotive suppliers.  

Ukraine and Russia play a role in the downstream automotive supply chain. 29% of steel imported into the EU comes from Ukraine. It is also one of the largest suppliers of a number of noble gases used in the production of chips, particularly the neon used in lasers that etch features onto chips. According to an insider quoted in the FT, Ukraine is responsible for 25% of global neon supplies. Further, Russia represents:  

  • 9% of primary aluminium EU imports 
  • 42% of semi-finished steel EU imports 
  • 42% of palladium supply (85% of palladium produced is used for automotive catalysts) 
  • 12% of platinum supply (39% of platinum produced is used for automotive catalysts) 
  • 9% of rodium supply (91% of rodium produced is used for automotive catalysts)  
  • 11.2% of the world’s nickel production used in vehicle batteries 


Initial impact on auto suppliers 

“I think it’s safe to say that the war in Ukraine has dramatically shifted the risks facing global supply chains, with all of the geopolitical and economic uncertainties it comes with,” said Sigrid de Vries, CLEPA’s Secretary General. “Our sector does its utmost to play its part, from delivering practical support to employees in the region, to implementing the new boundaries set by sanctions and making arrangements for alternative supplies to keep operations going.” She goes on to say, “European suppliers were already facing many challenges, and the crisis will likely only intensify the situation for the industry. For example, the crisis could exacerbate the pressure on the global chip shortage, which began during COVID-19 and has been at the centre of the severe drop in vehicle production. If the conflict is not resolved in the near future, we can expect the chip shortage to only get worse. Supply of critical raw materials will be impacted as well.”  


Raw materials and energy prices 

Logistical disruptions, bank and payment issues, and compliance concerns have halted significant parts of the flow of raw materials from Russia to the EU. Suppliers relying on certain steel products, for instance, have seen all their deliveries blocked since the end of last week. In terms of critical materials, automotive suppliers are currently bracing for shortages of neon gas for microchips, palladium for catalytic converters, and nickel for lithium-ion batteries.  

Energy prices were already on the rise prior to the conflict in Ukraine. Europe in particular will likely feel the most pain from further energy price spikes, as it is dependent on Russia for natural gas. Oil prices have surged worldwide, as buyers are effectively ostracising Russian oil supplies. The factors influencing energy prices and their interlinkages require monitoring and appropriate conclusions for policy and regulation.  


Transport of goods and border controls 

Export restrictions and controls are causing issues as not only customs authorities but also freight forwarders will have to make themselves aware of the new restrictions and thousands of different products and technologies traded between Russia and the EU.  

The crisis is also resulting in disruption of global transport and its full impact is yet to be felt in coming days. Polish transport companies alone employ 103,000 Ukrainian drivers, who either made their way to the battlefield or are seeking to bring their families to safety. Some truckers have no longer been able to cross borders, leading to separation of trucks and trailers, as the trailer crosses the border and continues with another truck/driver.  

The train lines for cargo between the EU and China (through Ukraine and Belarus) are currently disrupted. It is important in both directions for imports of components and raw materials as well as exports of finished goods.  Air transport is also blocked. The closure of Russian airspace to Western airlines has led to EU logistics companies to stopping shipments there until further notice. Shipments to Belarus and Ukraine have also been affected. 

Many of these companies rely on global operations and the international flow of goods. A mid to longer term plan is urgently needed. The sector would benefit from a strategy to avoid disruptions and protect the workforce. 


EU sanctions 

The EU has applied several restrictive measures in response to Russia’s actions in Ukraine. The current package includes export limitations for dual-use goods and technologies, export bans for additional defence technologies, export bans for aviation and space industry, restrictions for the financial sector, and measures against persons and their assets. Only a limited range of automotive components appears on the list of banned exports, but the impact on trade of auto parts between the EU and Russia is likely to be significantly higher as several types of sanctions reinforce each other 


  • Export ban of dual-use items: The EU imposed further restrictions on exports of dual-use goods and technology, which might contribute to Russia’s technological enhancement of its defence and security sector. Automotive suppliers are no longer allowed to sell any of the products listed in the dual-use regulation to any natural or legal person or entity for use in Russia. The products listed can be used both for civilian and military purposes. For most automotive components, it is quite clear that no military use is intended and therefore the direct impact is limited. Nevertheless, a company exporting, for instance, a sensor or GPS solution to Russia, will require an assessment of whether or not this product is affected and, if not, how it can declare to customs authorities that it is not affected by the dual-use limitation.  
  • Export ban for additional defence technologies: The new measures also prohibit the export of a wide variety of items beyond the dual-use List. A new Annex VII to Regulation 833/2014 has been added, which contains items that the EU considers “might contribute to Russia’s military and technological enhancement, or the development of the defence and security sector.”  This list is much more extensive and will for instance make the export of engines or engine components for commercial vehicles very difficult, as it will be difficult for exporters to guarantee that their components do not end up in military vehicles, even when unlikely.  
  • People: In total, 654 individuals and 52 entities are now designated under EU’s Russian sanctions regime, entailing an asset freeze and a prohibition on making funds or economic resources available to, or for the benefit of, the listed persons. Entities that are owned or controlled by an individual or entity subject to restrictive measures are generally regarded as being subject to the same restrictions. Automotive suppliers therefore should assess the ownership structure of both client and supplier companies to make sure these are not owned by individuals or entities on the list. The prevalence of indirect ownership and high level concentration of ownership among economic elites means it is a challenge to assure that a business partner is somehow owned by a person or entity on the list. Legal risks will weigh heavier when making business decisions in Russia, this may also affect the import of goods like aluminium, palladium or steel.   
  • SWIFT the expected exclusion of seven Russian banks from the SWIFT financial-messaging system will further impact businesses, as it will make it much more difficult to obtain the payment for goods delivered.  


The US, UK, Japan and other countries issued their own sanctions. Russia also may impose countermeasures, including freezing funds of foreign companies and nationals.  

It is important to note that the EU will this week announce further sanctions against Belarus. Reuters reported that “the aim will be to stop exports of any further Belarusian goods and that will include mineral fuels, tobacco, wood, cement and iron steel. The EU will also remove some of the loopholes that were still there on exports of potash. 

In this context, clear and reliable information is key for automotive supplier companies. On sanctions, in particular, many businesses will need practical guidance for their application, or have questions related to their specific situation. CLEPA will continue to monitor developments and provide timely information.  




 CLEPA has done its utmost to use and refer to reliable information and sources but does not accept any responsibility for misinformation and will not be liable in respect of any special, indirect or consequential loss or damage. 



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