Posted on: March 1, 2022

As Russia’s war against Ukraine continues this week, the U.S. trucking and transportation industries are facing rising fuel prices and a potential influx of offshore cyberattacks, both of which could hurt the already fragile national supply chain and impact inflation.

There are a lot of articles and reports offering warnings of impending cyber and other attacks from Russia. “It’s too much,” Ben Barnes, chief information security officer and VP of IT services for transportation solutions provider McLeod Software, told FleetOwner. “It all can’t be true in my mind. But some of it probably is—we just don’t know what. So we have to rest on some of the cybersecurity frameworks that we have in place.”

Nearly a week into the war, Ukraine still has internet service, baffling some cyber experts who expected Russia to perform cyberattacks along with the military invasion. Barnes said he was amazed that Ukrainians were still using the internet and social media to get information into and out of the country.

“I’m a little surprised that wasn’t on Russia’s main bombing target, if you will, to go take out the towers and the ISPs,” he said on Feb. 28. “Maybe there’s some method to the madness for why they’re leaving it up. I hope that’s not to facilitate deeper cyberattacks in other countries. But with the mind games they are playing over there, I wouldn’t even fathom to understand.”

Richard Clarke, former White House cyber coordinator and author on cyberwarfare, told the Washington Post that Russia could be too busy dealing with the surprising Ukrainian resistance to initiate cyberattacks in retaliation for U.S. and European sanctions leveled against the regime of Russian President Vladimir Putin.

“We still believe retaliation, including cyberattacks, is coming,” Clarke said.

Sanctions abroad drive up costs in U.S.

Those cyberattacks could come in retaliation to severe sanctions levied against nearly all Russian commodities exports to the U.S. and E.U. and NATO countries. Most U.S. and E.U. sanctions target Russian banks and oligarchs.

About a third of Europe’s fossil fuel consumption is in Russian natural gas. And Russia is the world’s second-largest oil exporter, after Saudi Arabia. Because of this, President Joe Biden’s sanctions against the state leave room for Russia to continue to export energy commodities. He said this was to limit the pain to U.S. consumers at the pump. “Our sanctions package we specifically designed to allow energy payments to continue,” the president said.

In the corporate energy world, two major oil companies, Shell and BP, also announced they were leaving joint energy ventures in Russia in response to the attacks on Ukraine.

There are already tight energy supplies around the world. The U.S. does not appear to be able to replace Russia’s supply if it were removed from world markets, and OPEC countries have not committed to increasing production, according to analysts.

Some oil prices topped $100 per barrel on Feb. 28 as concerns about Russian energy supply disruptions push oil and fuel prices up in Europe and abroad. Russia crude oil makes up about 10% of the global oil supply. Goldman Sachs, also on Feb. 28, raised its one-month Brent crude oil price forecast to $115 a barrel from $95, Reuters reported.

“We don’t trade much with Russia, so the main impact is via oil prices,” Tim Denoyer, VP and senior analyst with ACT Research, told FleetOwner on Feb. 28. “We’ve been trimming our freight volume forecasts for several months as oil prices and inflation have pressured the consumer spending outlook, and crude oil at $100 per barrel means more inflation and less cash in consumers’ pockets.”

At the pumps in the U.S., diesel was up nearly 5 cents per gallon on Feb. 28, compared to a week ago, according to the U.S. Energy Information Administration. Averaging $4.104 per gallon in the U.S., the highest diesel costs on the East Coast are in the Mid-Atlantic ($4.309) while in California, diesel is up to $5.077 per gallon. Gasoline jumped nearly 8 cents this week, averaging $3.608 per gallon in the U.S.

If European and NATO countries decide to impose sanctions by blocking crude oil and natural gas exports from Russia, it could lead to fuel shortages, according to Christopher S. Tang, a University Distinguished Professor and Edward W. Carter chair in business administration at the UCLA Anderson School of Management. Tang this week wrote an in-depth column about the new wave of supply chain headaches for IndustryWeek, a FleetOwnersister publication.

Tang noted that in 2021, 40% of EU’s gas and over 25% of crude oil were imported from Russia, whereas 7% of U.S. crude oil was imported from Russia.

“Of course, fuel is a major component of the cost of trucking,” ACT’s Denoyer said. “Most of those costs are covered by fuel surcharges, except truckload carriers’ empty miles, in general, so higher fuel prices still add modestly to carriers’ costs, and to the overall cost of transportation.”

North American commercial vehicle manufacturers have less to worry about at the moment because they don’t rely on Russia for components, according to Kenny Vieth, president and senior analyst with ACT Research. Russia also does not import that many medium- and heavy-duty trucks.

“We are not aware that there is any North American medium-duty/heavy-duty component sourcing coming out of Russia and Ukraine,” Veith told FleetOwner. “Looking at statistics from our partners in the Global CV Report, LMC Automotive, only about a quarter of medium- and heavy-duty vehicles sold in Russia are made by Western manufacturers, with even fewer manufactured there.

Veith provided these annual commercial vehicle averages, between 2019 and 2021:

Global MD/HD sales: 3.4 million units/year

Russian MD/HD sales: 84,000 units/year

Russian OEMs sales: 62,000 units/year

Non-Russian OEM sales: 22,000 units/year

“Over that period, ‘western brand’ MD/HD truck production in Russia averaged around 22,000 units per year. Based on sales data, we assume that all of those trucks are consumed in Russia. To sum up, commercial vehicle market impacts on a global basis are narrow and very inwards focused.”

Cybersecurity crucial now

Russia’s aggression against independent Ukraine and its much smaller military has found firm resistance in the days’ old war but has been moving closer to Kyiv, the Ukraine capital, and taken control of some smaller border towns.

The rising oil prices could come if Russia cuts off its exports of energy commodities in response to the U.S. and European Union financial sanctions to isolate Vladimir Putin, the Russian government, and the wealthy oligarchs who support both. Russia’s other way to respond to the West is through cyberattacks on U.S. businesses.

“If you haven’t reviewed your best cybersecurity practices in a while, now is the time—regardless of what’s happening in Ukraine,” McLeod’s Barnes told FleetOwner.

Barnes said the transportation industry, particularly third-party logistics companies and people-moving organizations (such as airlines and rail services), are most likely to be cyberattack targets.

The February breach of Expeditors International, which manages global freight shipments, is one of several recently aimed at the logistics industry. And with Putin potentially looking to lash out over sanctions, cyberattacks might be one of his few non-nuclear options.

Speaking Sunday on CNN’s “State of the Union,” Beth Sanner, former deputy director of U.S. national intelligence, said the intelligence community still believes that Putin wants to avoid a nuclear war with the U.S. “I’m still in the category of ‘we should be worried.’ But I am more thinking: ‘shields up, America’ on cyberattacks. That’s probably what we’ll see first. I think that these sanctions are significant enough that he’s going to start seeing some real pain. And what else does he have to do—short of pushing a button?”

Retired Lt. Gen. James Clapper, former director of national intelligence, said on the same program that cyberattacks from Russia would likely be directed toward financial sectors “or some portion of our critical infrastructure—so we need to have our cyber guard up.”

Added Sanner: “Everybody should go to work and change their passwords and update their security systems. There’s a whole range of things that they can do, but certainly, Russia is and has been inside our cyber, our critical infrastructure, for years. So they have quite a bit of capacity.”

Barnes, who regularly monitors ransomware and other cyberattack trends, said that attacks from that part of the world on the U.S. slowed in the weeks before Russia invaded Ukraine. “My anecdotal kind of evidence is most of your ransomware-as-a-service is coming out of that part of the world—and they don't have time to do a whole lot right now,” he explained.

Barnes said they could be more worried about failing internet connections. “Although I don’t have any statistical evidence, we’re not seeing the impact in the transportation industry over the last week or two that we’ve seen in the weeks or months prior to that,” he said. “Now maybe they’re just building their arsenal to ramp up attacks.”

He said now is the time for U.S. businesses to review and rely on their cybersecurity frameworks, including awareness and education, such as regularly changing passwords at work and home. “Regardless of what’s going on in Ukraine, everybody should change their password anyway,” Barnes said.

With hackers possibly hampered in eastern Europe, Barnes said it’s a good time for U.S. businesses to take advantage: “If you haven’t reviewed your IT security plan in a while, go review it now.”

He said there are a lot of unknowns about Russia’s potential cyberattack plans. “The facts are we don’t know the facts,” Barnes said. “It could be a really good thing. It could be a really bad thing. It’s just too early to tell.”

The good news is the transportation industry had already started taking cyber issues more seriously last year, Barnes said. “I think we, as an industry, have come a long way in our cybersecurity,” he explained. “A lack of cyber adoption was our big hurdle for a long time. I don’t think we suffer that anymore.”

While the transportation industry was once the “low-hanging fruit” for cybercriminals, that is no longer the case, Barnes said. “I think a lot of the attacks in the transportation industry now are very targeted. It’s a high-value market now,” he explained. “High value doesn’t mean profitable, but there’s a lot of revenue, there’s a lot of dollars in transportation that are moving. And that makes us very likable for a thief.”

Original Article: https://www.fleetowner.com/news/article/21234849/ukraine-update-understanding-risks-to-us-trucking-transportation