Russian Vessel at North Sea Port

Countries are quietly going back to the era of protecting their indigenous shipping companies against competition with foreign shipping lines. To give their local shipping company leverage they are reserving a chunk of the export cargoes exclusively for their shipping industries.

In the last six months, the government of Indonesia has pass legislation which requires exporters to use Indonesian vessels for the carriage of crude palm oil and coal. Russia, on the other hand, plans to restrict the loading of hydrocarbon cargoes at northern sea routes only to Russian vessels.

The beginning of imposition of restrictions on national cargoes is said to be a very worrisome development to the international maritime community as it watches the event in these two countries closely. This is so because Domestic cabotage restrictions are common but it is uncommon for a modern state to limit the nationality of vessels used in international trade.

The restrictions are also sources of concerns to international ship owners as they are adverse to any form of limitation of the international shipping trade. The proposed Russian law aimed at protecting and patronizing local Russian vessels is view as specifically targeting new investments that are coming along in a couple of months and years which greatly favoured foreign ship owners.

The new Russian law would appear to cover Sabetta, the seaport for Yamal LNG’s icebreaking LNG tankers. These highly specialized vessels are operated by Russia’s Sovcomflot, but none are Russian-built, Russian-owned or Russian-flagged. It could also affect VostokCoal, a giant project on the Taymyr peninsula that expects to ship tens of millions of tons of anthracite per year by 2025. VostokCoal’s backers announced a major shipping contract with Danish firm Nordic Bulk Carriers last March.

Russian Container Vessel

The good news, however, is that already signed contracts with foreign international shippers are permitted to see through their contract but it is unlikely if there will be a renewal of such contract. Despite the law’s apparent restrictions, these giant contracts will likely remain in place. Russia’s Duma included a loophole to exempt energy companies that already have contracted for foreign shipping services, sparing existing business arrangements.

One of the interests greatly affected by the proposed Russian legislation is the Danish Shipping which has already initiated dialogue between the Danish government and the Russian government to fully understand the impact of the legislation.

According to Thomas Sylvester, a senior advisor at Danish Shipping “We are concerned with the new Russian legislation. The meetings of the transport working group and the governing council are therefore a welcome opportunity to discuss the new initiatives – and to create greater clarity for the industry about the scope and implementation of legislation,”.

The greatest fear about the new Russian legislation is that it could send a dangerous signal to other countries to follow suit in restricting some lucrative cargoes only to their local shipping companies or ship owners .such action could spell doom to international shipping and cabotage.This view was shared by Jacob Clasen, Executive director of Danish Shipping when he stated that “It’s a regrettable signal to send to the world at a time when other nations are also starting to talk about protectionism“.

Indonesian Vessel

Already, The Indonesian Ministry of Trade had in October 2018 enacted a law that will restrict export loading of crude palm oil and coal to vessels controlled by Indonesian maritime transportation companies. The law which is effective in April 2018 has already gotten the global ship owners and Indonesian exporters very worried.