How the Russian and Ukrainian conflict will affect government procurement in Australia

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On 24 February 2022, a significant military operation in the Ukraine was launched by Russian forces. This military action will have impacts on Australia’s supply chains and procurement processes as Australia joins its allies in imposing a sanction regime against the Russian Federation.

The commercial implications of this will need to be considered by procurement officers.

Some of the immediate effects that we anticipate are:

  • Rising oil prices
  • Sanctions regimes where we need to ensure our supply chains do not include the Russian Federation
  • Enhanced awareness of potential impacts on bordering regions, resulting in their decreased capacity to engage multilaterally.

Australians have no doubt noticed the rising cost of petrol, with oil prices set to hit over $120 a barrel. On a global level, Russia accounts for about 8 percent of the global supply, currently piping 250,000 barrels of oil a day, 0.25 percent of global supply through Ukraine. Australian retailers are starting to feel the pinch, with rising prices of petrol predicted to be passed on to consumers.

Due diligence in procurement contracting will be crucial to ensure that contracts and supply chains are protected against businesses that have links to the Russian Federation, in line with sanction regimes proposed for implementation by NATO and its coalition partners. Failing to properly scrutinise subcontractors or manufacturing processes may allow subcontractors or supply chains with direct links to the Russian Federation to bypass the sanctions regime, thereby diminishing its intended effect.

Transparency in procurement processes will ensure our international obligations are met and assist the Australian Government and its commercial processes from undue risk and reputational damage, thereby protecting Australia’s relationships with NATO and its primary allies.

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