Monday, 27 February 2012

EU sanctions against Iran to have serious insurance implications for Indian tonnage.

Western sanctions on Iran meant to target Iranian oil revenues may not be working too well; however, Indian shipowners face a serious connected risk- the loss of insurance coverage for ships that trade with Iran. Reports say that the European Union embargo that comes into effect on the first day of July this year will have the unintended consequence in that Indian ships will have to find replacement insurance coverage if they want to continue to carry Iranian crude.  Worse, these developments are likely to result in a spike in insurance costs. India is a big oil importer of Iranian oil.

As the U.S. and Europe continue to slap financial and trade sanctions on Iran in an attempt to discourage its nuclear programme, European insurers will be unable to provide, after July, cover to the part of the Indian tanker fleet that will carry Iranian oil. Shipping Corporation of India will be the worst affected; it is the largest tanker owner in the country. 

"We are covered by P&I clubs in the EU," Sunil Thapar, director at Shipping Corp of India told Reuters. "These clubs will not be able to give us coverage for vessels to Iran from July. It will be difficult for Indian shipping lines to transport Iranian crude unless alternative arrangements are made."

European and other companies have stopped new deals with Iran, which means that Asian traders will have to use domestic companies to carry oil from that country. The problem is that India does not have a developed maritime insurance industry of any useful size or standing, unlike say, China or Japan, both of which will not face these issues come July 1. India will be forced to seek alternate cover from companies located in Russia or the East- Singapore, Hong Kong, Japan or China. 

Experts say that at least some of these markets will be problematic, as Hong Kong and Singapore are closely linked to the West and Japan will not be able to service Indian firms easily; it takes months for new tonnage to get P&I cover there. Additionally, members of clubs everywhere will be chary of accepting Indian tonnage plying to Iran- it raises risks for all in the club and there will be legitimate fears that 'calls' or premia for each of its members will escalate. Unfortunately, of the three major Iranian crude customers- China, Japan and India- India will be the worst affected; the others are already covered at home and will not have to seek alternate insurance. 

China seems to be the best alternative for Indian firms, especially if the government there seizes the opportunity to promote domestic insurance companies and increase their global footprint. "The China market has some extremely large insurers that may decide it is a good business," Iain Anderson, a Singapore-based lawyer with Ince & Co, told the Economic Times.

Iran is the second biggest oil producer in the OPEC after Saudi Arabia. The sanctions against it have not meant too much to its oil revenues thus far because the reduced volume loss after the sanctions began has been largely offset by the price of oil that has jumped after the rhetoric between Iran and the West escalated. Brent crude is hovering around $121 a barrel today; it was a little over $105 two months ago. Analysts say that the market has factored in the new sanctions into the oil price, but it remains to be seen whether this will spike after July- some experts are predicting a 150 dollar a barrel price benchmark for the latter part of the year. That, if it happens, will be another blow to the Indian economy.

Thursday, 23 February 2012

Helicopter saves ship as another drunken Captain falls asleep on watch

The Danish navy seems to have its hands full with drunk Masters and crews falling asleep while on watch in their waters. In the early hours of February 17, a rescue officer had to be lowered from a helicopter to try to wake up the Russian Captain of a cargo ship passing through the Great Belt straits; he had either fallen asleep or passed out in a chair on the bridge. The incident has remarkable similarities with another we reported in October last year, where a F16 fighter plane was scrambled in almost identical circumstances. ( See F16 scrambled.....    )

Admiral Fleet Denmark (SOK) observed the Bahamas-flagged vessel following an erratic course dangerously close to the coast and dispatched a helicopter to investigate. The Great Belt- where the incident took place- is the largest and most important of the three straits of Denmark that connect the Kattegat to the Baltic Sea. The 82-metre cargo freighter 'Danica Hav', on a ballast passage from Sweden to Lubeck, was heading straight for land around Sj√¶llands Odde when a rescue officer was lowered to her deck- this was after bright lights were shone on the Captain on the bridge in a desperate attempt to wake him up; they did not work.  “The helicopter flew alongside the ship and shone its light right into the captain’s face. He was sitting in a chair fast asleep,” said an officer of the Central and West Zealand Police. 

 “He (the rescue officer) went on deck and tried to wake the captain but couldn’t. The captain just kept falling asleep again.” The Chief Officer was woken up instead, who managed to turn the ship minutes before it ran aground. 

The Russian captain was subsequently arrested since there was a strong smell of alcohol around him. Flown ashore, a blood test taken eight hours after the arrest showed a reading of 2.18 grams of alcohol per litre. A judge in Holbaek ordered that he be kept in custody until a hearing on March 13.

In the earlier October incident, the Danish Navy Operational Command had scrambled a F 16 fighter plane, a helicopter and a surface vessel after failing to contact the cargo vessel "Ranafjord" for six hours during which she maintained an 'abnormal course'; the Captain was so drunk that he had left the bridge to go to sleep in his cabin. Many of the crew were found to be drunk later.  The ship was close to running aground when the F16 finally got some of the crews' attention and she was turned around. Officials found the Captain- who was supposed to be on the bridge- dead drunk and asleep in his cabin.  He tried to blame his equally drunk First Officer, but the logbook showed that he had gone off duty.

The situation would be comic if it were not so serious. It is a well-known fact that industry wide alcohol policies do not seem to apply on European owned and manned coasters. Unfortunately, they are often desperately short manned as well, and on very hectic runs where fatigue and alcohol combine to make a lethal cocktail. While the former is acknowledged somewhat, the latter- near alcoholism in crews from certain countries- is equally dangerous, as these incidents show. 


Indian Government mulls Flag State endorsement for armed guards on merchant ships.

In developments close on the heels of the tragic killing of two Indian fishermen by Italian armed guards aboard the tanker "Enrica Lexie' off the Indian coast, media sources suggest that the Ministry of Shipping is contemplating making a Flag State endorsement compulsory for merchant ships entering Indian waters if they have armed security guards on board. If declared, the aim will be to ensure that jurisdictional issues are more easily dealt with in future, and that the Government of the country in which the vessel is registered is also accountable for the actions of armed guards aboard their vessels.

The Enrica Lexie incident has enraged many in India; two Italian armed forces personnel shot and killed two fishermen on an Indian fishing boat that came within a hundred metres of the vessel and were mistaken for pirates, according to the Italian version of the story. It appears that no warning shots were fired and no emergency alarm raised before the fatal shooting. The Italians initially claimed that the fishing boat was actually a pirate vessel, but changed their story later, saying that the incident happened in international waters and was therefore outside Indian legal jurisdiction. The Enrica Lexie was diverted by Indian authorities to Kochi; media reports say that two security guards have been now arrested and an investigation is underway.

The common practice for employing armed guards is for a Flag State to give general approval for their carriage, subsequent to which an owner can get into a contractual agreement with a security company without further Flag State intervention. In cases like with the US, where their armed forces provide guards on US registered vessels, rules of engagement may specify that the defence personnel report to a military commander ashore and not the ship's Captain. Many countries including India allow registered ships to have armed guards; the IMO has issued guidelines for their deployment.

If rolled out, the Indian government's mulling of the Flag State endorsement for ships carrying armed guards may be more pertinent to Flags of Convenience- where a ship is registered in one country and owned, managed, crewed and operated by nationals of many other countries. In addition, the contracted security agency may belong to yet another country and individual security guards can come from anywhere. With such complicated operations, jurisdictional issues can be a nightmare. Some Indian government officials say that making the Flag State share responsibility will sort out many of these problems of jurisdiction and liability. 

Meanwhile, to add to the confusion, the port of Kochi says that the Enrica Lexie has been moved, as its location was hampering the movement of other vessels in its present location and that crude oil imports were being delayed. Bharat Petroleum Corporation Ltd's Kochi refinery was badly affected and had approached the port for help. The blocked berth was the only one that can take tankers with a 12.5-metre draft, according to reports.

Maritime experts say that jurisdictional issues in incidents involving armed guards will not be easy to handle, Flag State endorsement or not. They point out that many flags are notorious for dragging their feet in any kind of investigation, be it a marine accident or any other. Making Flag States jointly responsible on paper is one thing, experts say; making them cooperate fully will prove extremely difficult in practice.


Thursday, 16 February 2012

Whistleblower could make hundreds of thousands of dollars

Almost a year ago, on Feb 19 2011, US Coast Guard inspectors were slipped a note by a Filipino junior engineer as they boarded the Malta flagged MV  'Aquarosa' in Baltimore.

"I have something to till you but secret," Salvatore Lopez wrote, using all capital letters.  

That note- and his subsequent testimony- may result in Lopez taking home hundreds of thousands of dollars as a reward for 'whistleblowing.' A US Federal Court has now ordered the owners and operators of the Aquarosa to pay $1.85 million for illegally discharging oily waste and garbage into the ocean as the vessel approached Baltimore; they have also been fine $550,000 that will go to a foundation that works to restore the Chesapeake Bay and other Maryland waterways. This was after the Aquarosa's managers pleaded guilty to four counts of pollution and an attempt to cover up their actions.  The Filipino whistleblower, a father with four children, earns about US$27,000 a year. According to US federal law, his share of the fine can be as high as fifty percent. 

Lopez had provided investigators with photocopies of the ship's logs and hundreds of pictures that he had taken with his cellphone- over the eight month voyage- of illegal installations and activities aboard the ship. These showed that the Chief Engineer had installed an illegal "magic pipe" that bypassed pollution-control equipment and allowed sludge to be pumped directly overboard at sea. Logbooks and records were subsequently falsified. In addition, senior engineers had ordered the crew to throw oily garbage overboard.
Federal prosecutor Richard Udell says that illegal dumping of oil and garbage at sea is "virtually an epidemic," pointing out that, "without Lopez coming forward, the crimes that occurred aboard the Aquarosa would still be going on." 

The court fined Danish owners Aquarosa shipping and Greek managers Efploia Shipping Co. US$925,000 each. In addition, they have each been ordered to pay US$275,000 to the National Fish and Wildlife Foundation. They will also have to make an environmental compliance plan that will be subject to audit by a court-appointed authority. Another consequence: authorities in Malta say that the Aquarosa will be struck off their register. 

The two defendants did not dispute Lopez's evidence, but Efploia's lawyer Gregory Listin told the court that Lopez should not be given any reward because he did not inform company managers who would have corrected the problems. Listin said that giving a reward to Lopez would send a wrong message to seamen.
"They can snap their pictures and take their notes knowing that when they get to Baltimore or another US port, they can turn it over and earn the equivalent of 33 years' salary," Listin said. "Eight months on board and 96 days in port and [Lopez] said not a single word until he got to the cash register."

Lopez's lawyer, J. Stephen Simms had this rejoinder to Listin- "If money was the driving factor, where were the other 21 seamen on the Aquarosa?"

Nonetheless, shipowners and managers operating vessels to the US are reported to be getting increasingly concerned about many such high profile whistleblowing incidents in the last few years. Some express the fear that, even if a vessel is following all the rules and doing nothing illegal, a disgruntled employee could- with just a note to the USCG- set off a chain of events that result in huge legal costs and delays to innocent operators and owners.


More than a hundred vessels stuck in ice as Sea of Azov freezes


Abnormally cold weather in Europe has resulted in the worst freezing in the Sea of Azov seen in the last three decades. The Emergency Agency of Ukraine reports that at least sixty ships have been stuck for almost two weeks in 30 cm thick ice with icepacks rising 1.2 metres high. One- the Captain Ivan Vikulov- has caught fire. Many are running out of food and fuel and around a hundred other vessels are clustered around the Kerch Strait that connects the Azov and Black seas. In addition, around seventy vessels are stuck in Russian ports alone, increasing the tally of vessels frozen in ice to well over a hundred. Ice covers almost the entire Azov sea- a 14,500 square mile northern extension of the Black Sea and with a maximum depth of only 14m, making it the shallowest sea on earth. Unconfirmed reports from Russia say that at least a hundred vessels have sent out distress signals, asking for immediate icebreaker assistance or the delivery of fuel and provisions. 

One of these vessels, the Turkish flagged Alaca-1, was deserted by the crew around Feb 7 after being holed in ice. The Maltese flagged 'Captain Ivan Vikulov' sent out a distress message after a superstructure fire on Feb 5; she had been stuck in heavy ice since late January while on a passage from Algeria to her discharge port. She was provided helicopter and icebreaker assistance and is now reportedly anchored about 50km off the coast- all her crew were either winched to safety or had to abandon their vessel and shift to the assisting icebreaker as the fire spread. 

Rescue helicopters- and four Russian, two Ukrainian  icebreakers and three ice classed tugs- are working round the clock to assist stranded seafarers, but their efforts are woefully inadequate for the dozens of ships that need urgent help scattered around a huge, frozen area. In addition, jurisdictional issues are hampering rescue operations, reports say, with Russian rescue agencies claiming that most of the vessels are trapped in an area controlled by the Ukraine. 

The Maritime Administration of Taganrog port, Russia, has started publishing a daily Azov Sea Situation Report last week, putting out an incomplete (since vessels to and from Ukraine are not included) list of vessels trapped by ice in the Azov Sea and Kerch Strait. Around seventy vessels are clustered around the latter; the good news is that many of these are not at risk of running out of supplies. 

With prevailing sub-zero temperatures that experts say will not improve for at least another week, agencies in the area say that the situation will almost certainly worsen as more and more ships run out of food and fuel or face other problems. The only way ships can be reached reasonably quickly is by helicopter, and the fear is that more crews will have to be evacuated from ships or from the ice as time passes. Many of the beleaguered vessels are coastal ships on short voyages that do not carry large quantities of provisions or fuel anyway, and they have already spent almost two weeks stuck in ice. 


Monday, 13 February 2012

Class Action: Concordia's personal injury claims alone may exceed $500 million

“These people have no idea what their agonising experience is worth yet".

The Costa Concordia sinking is on track to likely end up as the biggest ever shipping loss for insurers; along with the costs of salvage or wreck removal comes more bad news for Carnival: A class action suit- one of several expected to follow- has been filed in the US by a Chicago law firm on behalf of passengers and crew.  Another suit- seeking at least $500 million- is in the pipeline. (A class action suit involves a group of people getting together and collectively suing a class of defendants.)  In addition, many survivors of the incident from UK, Italy and the US have already filed personal lawsuits in Miami where Carnival is headquartered.  Meanwhile, some of the Concordia crew that have returned to the Philippines are being solicited by lawyers to go to court to demand proper compensation instead of what they say is a pittance.

Chicago’s Ribbeck Law firm- that filed a lawsuit in a US District Court- is gunning for Carnival Corp and its subsidiary Costa Crociere. Asking for class-action status on behalf of all passengers and crew, it summarises its case: “(Captain) Schettino attributed his action to the cruise company encouraging the practice of sailing close to the island because it was good publicity and went down well with the passengers in the increasingly competitive cruise business.” Ribbeck says that Schettino's action was cowardly and reckless and that, in addition, “Defendants failed to properly and timely notify all plaintiffs onboard of the deadly and dangerous condition of the ship”.

Another class action will be probably filed soon by personal injury specialist law firm Proner & Proner in Florida, who say they will demand at least $160,000 for each passenger aboard, besides "hundreds of thousands more for those seriously injured and for families of deceased passengers ", which will make the claim total to more than $500M.

Passenger and crew claims may be strengthened by the fact that comments made by Schettino to a friend over the phone after he was arrested were recorded and have been now made public. The Captain of the Concordia reportedly said, “Management was always saying ‘pass by there, pass by there’. Someone else in my position might not have been so amenable to pass so close, but they busted my b---s and now I’m paying for it.”

Costa Cruises had desperately tried to pre-empt large claims by offering, well before the class action filing, a relatively paltry $14,500 to each of the passengers aboard Costa Concordia for lost items and 'psychological damages' on the condition that they agree to drop all future legal action; injured passengers would be dealt with individually, Costa said. Unconfirmed reports say that this deal would cover the crew as well, but reports from the Philippines suggest otherwise.

Almost every lawyer has advised passengers to reject the Costa deal. One umbrella Italian group instead advised survivors to join a US class-action lawsuit that is asking for $165,000 for each passenger. “All those who were on board the ship are entitled to be compensated not only for material damage  but also for fear and terror suffered, and the risks related to physical integrity," it said.

“Throwing money at survivors to effectively get them out of sight is not what we have in mind,” says Giulia Bongiorno, a lawyer who has about fifty passenger survivors signed up with him. “These people have no idea what their agonising experience is worth yet". 

Meanwhile, many of the Filipino crew of the Concordia are back in Manila, pressing for compensation of their own. Lawyers say that they are being offered a pittance. The mother of one of the seafarers told a local newspaper, "While they were still in Italy, the Italian office of Costa promised to pay the Filipino crew at least 3,500 Euros each. Upon arrival in Manila, however, their local agent downsized the compensation to 3,500 US dollars.” The amount is to cover lost personal effects and separation pay equivalent to one-month salary. 

There was no word on compensation for the injured crew, the report says, pointing out that- according to its website- Costa Crociere claims to have made 2.9 billion Euros in 2010.

Thursday, 9 February 2012

Al Qaeda plot to ram suicide boats into ships in the Mediterranean foiled, Algeria says

                                             (pic, USS Cole after 2000 attack)

Algeria says that it has busted an Al Qaeda linked terrorist cell that was planning to carry out suicide boat attacks in the Mediterranean against Western ships. Three members of the terrorist group-— H. Rabeh, T. Belal, and M. Tarek — have been arrested and have confessed to the plot; all belong to the city of Annaba and have links with Al Qaeda, authorities say.

The Algerian newspaper Echorouk quotes sources saying that the mastermind behind the attacks is the Al Qaeda in the Islamic Maghreb's (AQIM) Qassemi Salah al-Din, also known as Mohamed Abu Salah. Similar to the USS Cole attack in Aden in 2000 and a later aborted plot in Morocco that aimed to target ships passing through the Strait of Gibraltar, the Algerian terrorists' plan was to use a boat with a powerful engine, load it up with explosives and put it out to sea. A suicide bomber would then ram it into ships- targets of convenience- that happened to be in the area. 

It is believed that American and European vessels were to be hit. Algerian security says that the aim was to destabilise the Algerian economy and attract media attention, but analysts say that such an attack would have much wider repercussions on shipping and would pose a major threat to world trade. 

The Algerian plot came to light since the three suspects used to frequent internet cafes and browse jihadist websites under fake names; security surveillance was set up to track these men and their activities. The authorities' suspicions hardened after it was found that one of them- H. Rabeh- had got in touch with a known criminal involved in illegal immigration and got details about prices of boats and suitable locations from where a seaborne terrorist attack could be launched. A boat was subsequently purchased according to reports. Algerian authorities now say that the three men have confessed to direct links with Abu Mohamed Salah.

Confirmation of the plot has come from US authorities as well. The New York Daily quotes an anonymous US official saying, “The U.S. was aware of the plot, which looks right now like it was in the early stages, but the Algerians deserve the credit for the arrests,” pointing out that the Malian Foreign Minister had said recently that there was a "confirmed link" between AQIM and Boko Haram, the Nigerian Islamist group responsible for many bombings and attacks on the Christian population in that country. 

US media- including ABC news- has been quick to remind viewers that the foiled attack plans bear a remarkable similarity to the suicide boat attack in Aden harbour on the USS Cole in October 2000 that left 17 American servicemen dead and many injured (see pic)- the result of two men ramming an explosive laden boat into the warship.

Valemaxes barred entry into Chinese ports

Giant ships a 'Trojan Horse,' say Chinese shipowners

Last week, the Chinese transport ministry announced that its ports would not accommodate vessel's with a deadweight of over 300,000 tonnes, a move that is clearly aimed at the series of 400,000 DWT 'Valemax' ore ships built by Brazilian mining conglomerate Vale and an attempt to protect Chinese shipping that is losing money. China probably felt that its position as the world's largest ore importer gives it leverage to push the decision.

A day later, to add to the confusion, the China Shipowners association provided what they said were more details on the rules: the ban actually applied to dry cargo ships of more than 350,000 tonnes DWT and tankers over 450,000 DWT, they said. Since no tankers of that size exist, the announcement has removed all doubts that Vale is the target; only they operate bulk carriers of more than 350,000 DWT.  

"My understanding of the rule is that it is strict and there are no negotiations," Zhang Shouguo, executive vice president of the China Shipowners Association, told Reuters.

So far, giant ships were given permission to dock on a case-by-case basis by local authorities in China. The transport ministry now says its decision was partly because of the downturn in shipping but also because of potential maritime safety issues.  “Considering the sizeable hidden dangers, we have decided to adjust the port management system for the berthing of large ships,” the announcement said.

Despite protests from the China Shipowners' Association, Vale's mammoth 'Berge Everest' had unloaded a full load at Dalian in China in December. Reports later said that the cargo was being stored in anticipation of firmer ore prices. Industry observers say that -protection issues aside- China is also wary of giving away too much negotiating power to Vale, which is responsible for almost a quarter of seaborne ore movements.  Some in China had protested at the Berge Everest docking, saying that the Valemaxes were a Trojan horse that would allow Vale to dominate the market. 

"It was certainly about regaining control over the shipping industry," says Macquire's analyst Graeme Train, speaking of the Chinese announcement. "By Vale controlling their own freight and wrapping up all the prices on a cost-and-freight basis, China would have lost control over the overall cost of shipping, which would have economic knock-on effects." Vale will now have to use the Philippines as a transhipment hub instead, adding to costs.

"Everyone knows that China can change its mind very fast. It's a game of chess between China and Vale," said shipping analyst Hans Navik.

Other analysts like Hu Yanping say that the Chinese move is temporary and will be rolled back once shipping recovers. That may take some time.  The fact is that State owned shipping firms in China are making losses and are likely to continue doing so for sometime. "The broader implication of this, I suspect, is that we could see more of these erratic protectionist measures as cost pressures build in China and many if these state-owned firms see their profits squeezed over the coming months," says UBS' Peter Hickson.

Interestingly, some of the Valemaxes are being built in China. It remains to be seen whether Vale will cancel some of these orders now, although Graime Train has another point of view. He says that the mining giant will not be too concerned about costs or transhipment. "They (Vale) need to get ore as quickly as possible from the west to the east and reduce their inventory in Brazil because that backs up their whole production chain. They can still do that so this is not that big a deal for them," he says.