Eastern Europe’s Passport Demand Surges amid Russia-Ukraine Conflict

The Russia-Ukraine conflict has necessitated Ukrainian citizens’ passport ownership. Millions of Ukrainian citizens continue to flee the country in response to the conflict, driving a major passport demand surge. Additionally, adjacent Eastern European countries are seeing similarly increased demand as citizens see passport ownership become a necessary measure should the conflict worsen and a prompt exit from their country be required. This includes Poland, Romania, and Hungary, where demand has increased upward of 300% since the beginning of the year, contributing to ABI Research’s figure for European shipments in 2022 exceeding that of 2019 following a 2-year slowdown for the passport market.

The Russia-Ukraine conflict has had a twofold effect on the government ID market. First, as described, Eastern Europe has seen a resultant demand increase for passports due to refugee migration and the anticipation of a potential need to migrate from surrounding areas. This adds to the growth of the passport market since COVID-19’s low point in 2020, with a recovery of passport demand already in motion after international travel limitations mostly ceased and passport renewal became more viable. This growth in demand is proving difficult for vendors to supply, given the existing challenges in the market concerning chip supply, supply chain problems, and inflation. Prior to the Russia-Ukraine conflict, despite some shielding from the global chip shortage due to the integral role of ID documents, not all demand could be met. This unforeseen Eastern European surge only adds to the challenge, especially in consideration of it not being anticipated, and unplanned volumes are more difficult to address given the market’s constraints. In some cases, vendors have responded by opting to allocate their supply toward ePassports and eIDs, to the detriment of other ID documents, as passports are viewed as a higher priority by governments, particularly considering the urgency of supply for Ukrainian refugees.

The second effect of this conflict plays into wider macroeconomic problems, worsening the economic climate and supply chains, which, in turn, make meeting this increased demand within the government ID market even more difficult. Alongside the ensuing energy cost increases from Russia’s major stake in energy production affecting virtually all industries globally, Russia provides around 40% of neon gas. Neon gas is an input for chip manufacturing, so the limited supply that will come as a result of the Russia-Ukraine conflict will act as an additional inhibitor to chip production, and thus to smart cards, which adds to the multitude of problems within the market, making adequate provision of smart ID documents more difficult.

The Russia-Ukraine conflict has added to uncertainty and existing problems. Prior to this conflict and the associated macroeconomic impacts, vendors were already in a difficult position. Chip sourcing and allocation remains critical to vendors’ strategies and should remain the primary concern in order to best position themselves for future impacts during a time of uncertainty and economic slowdown. Expanding sourcing options by qualifying new fabs in order to increase capacity where possible should be explored to maximize vendors’ ability to meet demand. Equally, demand modeling is of key importance, as unforeseen demand presents the most difficulty for vendors. Encouraging strong collaboration and transparency between ID players and customers, including customer forecasts, is the best way to prepare given supply shortages and supply chain issues.

Exploring digital-first approaches for certain ID documents should be considered as a future possibility to mitigate difficulties being experienced in the production and delivery of physical documents. In this instance, a digital or virtual credential can be issued and followed up with a physical document once available. This is of particular significance given the growth of mobile IDs, which will only continue, especially considering Europe’s upcoming electronic Identification, Authentication and Trust Services (eIDAS) regulation deadline in September 2023.