Russian Shipping: A Primer For Investors & lenders

By Nora Huvane

The really great thing about ships is that they are fungible. Whether a ship is owned in the U.S., Greece, Norway, China or Russia, that ship has a certain inherent value in the international marketplace. That value can of course be reduced by direct measures such as a legal environment that is hostile to owners or investors or an excessive taxation regime that cuts into the earnings potential of a vessel; just ask bankers who work with U.S. flag vessels. Even so, that value can be regained to a large extent by a simple sale or change of domicile.

The important thing is that the applicability of tax and legal regimes is dictated by flag state considerably more than by the owner’s domicile, which is good considering that the flag state of a vessel is a considerably less fixed variable than is the owner’s domicile.

So, while the thought of Russia for many investors may conjure up impressions of a formerly closed, centralized economy, albeit one that has been rapidly evolving over the past 15 or even 25 years, it is not just the evolution of the Russian business environment that is important. It is also important to distill the impact of this environment on Russian shipping companies from that on Russian ships, simply because many Russian companies own many ships that are not Russian.

This is only an excerpt of Russian Shipping: A Primer For Investors & lenders

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