Impact of sanctions on trade turn Black Sea to dead sea, Cyprus shipowner says (Update-1)

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By Stelios Orphanides

Increased geopolitical tensions in the Middle East and Eastern Europe are further exacerbating the pressure on rates for bulk and container cargo caused by the slowdown of economic activity in China, a shipowner said and asked Europe to reconsider its sanctions against Russia.

The sanctions imposed by the European Union, the United States, and other western countries following the annexation of the Crimean Peninsula by Russia in 2014 and the support of pro-Russian separatists, as well as Moscow’s subsequent retaliation in the form of a ban of food imports, have affected trade in the Black Sea considerably, said captain Eugen Henning Adami, owner of the Limassol-based Mastermind Group, which owns and manages ships. “Because of the sanctions, it is very difficult for companies which sold coal, steel or wheat to sell their products. All this business which was in the past standard shipments is now gone”.

Eugen Adami (2)Adami, who served as chairman of the Cyprus Shipping Council until last April, said that exporting to or importing from the area “now requires permits issued by authorities” and since the conflict affected economic growth in the area, the ability of some of the customers to pay for products has also suffered.

Shipping is one of the most important sectors of the Cypriot economy with the island’s ship management industry, one of the largest in the world, making out roughly 5 per cent of the economy, according to the Central Bank of Cyprus. Cargo rates dropped in recent months as trade between East Asia and the rest of the world started to drop, a development that mainly affects shipowners.

“The whole business has become very difficult and as a result available freights from the Black Sea disappeared from the market,” he said. “This is a big problem for shipping as the Black Sea occupied a lot of tonnage. Ships not operating there enter other European traffic which causes overcapacity there”.
He added that an expected recovery of trade, traditionally triggered by harvesting time in Black Sea counties in the third and fourth quarter, failed to occur in 2015.

Additional geopolitical tensions in North African countries like Libya, Tunisia and “also Egypt to some extent” — all three destabilised by Islamist militias — the ongoing civil war in Syria, which also engulfed Iraq, recent tensions in relations between Russia and Turkey, after the latter shot down in November a Russian military aircraft, as well as tensions within Turkey, negatively affect trade in the area further, he said.

“We, as the shipping industry can only send signals to Brussels that they should also think that sanctions imposed on people here and there in an attempt to encourage them to change their political behaviour, also affect us Europeans,” he said. “We have a problem there and hope for a speedy stabilisation of the Eastern Mediterranean area. We regard Russia entering the war in Syria as a positive development because it created a momentum which forces stakeholders to the negotiating table”.

Adami said that he remained optimistic over the prospects of the shipping industry in 2017, adding that he expects the situation with respect to trade volumes to stabilise in February when China — which saw its stock market plunge in recent months and its currency losing ground vis-à-vis other major currencies — enters the Year of the Monkey and people return to work from the holidays.

“This is what traditionally happens,” he said. “However, people take more time to think about or they even engage in absolutely no business activity at the moment. The reason is that they expect raw material prices to start recovering”.

Baltic Dry“We have extremely cheap iron ore, coal, steel, oil but nobody buys it,” he said. “But people are more reluctant to sell now. They store it instead” in anticipation of better times.

As a result of drop in international trade, the Baltic Dry index, which measures cargo rates, fell on Thursday 2.8 per cent compared to yesterday to 383, which is a 52-week low.

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