As Russia’s war in Ukraine continues, experts say sanctions and interruptions to the supply chain have made key commodities scarce, setting the stage for corruption.
As The Wall Street Journal reported Thursday (April 21), sanctions against Russia have led to short-term compliance issues for companies and set up some potential long-term challenges. Key commodities like oil, wheat, iron, and fertilizer are in short supply, either directly due to the sanctions or because the war has held back supplies from Russia and Ukraine.
And in this uncertainty, less-than-scrupulous actors can end up bribing officials to keep the supply chain moving.
“Scarcity causes corrupt actors to act upon their instincts,” Pam Davis, a partner at the law firm Winston & Strawn LLP told the Journal.
She chairs her firm’s U.S. Foreign Corrupt Practices Act and anti-corruption team and says that – as with most corruption cases – the largest threat is from third parties whose work can’t be as closely monitored as a company’s own operations.
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Ukraine conflict-linked shortages are fairly new, the journal report said. The article quotes Kara Brockmeyer, a partner at Debevoise & Plimpton LLP who led the Securities and Exchange Commission’s anticorruption enforcement unit.
She said that while she hasn’t yet counseled clients involved in corruption stemming directly from the Ukraine-Russia conflict, she has worked for clients that may have run afoul of American anti-corruption laws due to pandemic shortages.
“It increases the pressure to make sure that you’re finding goods, that you are finding alternative suppliers,” Brockmeyer said. “Those are really some of the pain points where we encourage our clients and their compliance officers to be paying attention.”
Read more: White House: COVID-19 Pandemic Will End Before Supply Chain Woes
Supply chain shortages may be an issue for some time, the White House said in a report released earlier this month.
The report mentions issues such as shipping backlogs, product shortages, and the highest inflation in 40 years as problems that preceded the COVID pandemic and said they are likely to still be problems when the virus is largely contained.
“Though modern supply chains have driven down consumer prices for many goods, they can also easily break,” the Council of Economic Advisers wrote in the report.
The report adds that climate change and the rising number of natural disasters that result will lead to more supply chain interruptions.