CRIMEA AND MARITIME SECTOR: STORY TO BE CONTINUED

• Shipping
• Ports and Terminals

On March 27, 2014 the UN General Assembly adopted a resolution 68/262, in which called upon all States, international organizations and specialized agencies not to recognize any alteration of the status of the Autonomous Republic of Crimea and the city of Sevastopol and to refrain from any action or dealing that might be interpreted as recognizing any such altered status. Without going deep into discussion whether or not the annexation of the Crimea has taken place, the new status quo is de-facto established. New questions continue to arise every day. Below we attempt to summarize them in the context of maritime sector.

Transport infrastructure

            Crimean sea ports, nationalized by the “government” of the breakaway region, as well as local branches of specialized pilot service now are subordinated to the newly formed enterprises "Crimean ports" and "Pilot-Crimea". It is not decided yet which Crimean ports will be placed under the authority of the Federal authorities of Russia, and which will remain under the authority of Crimea as the new subject of the Russian Federation.

On March 28, the Federal State Unitary Enterprise “Rosmorrechflot” appointed harbor masters of sea ports in Crimea. On March 31 the Crimean and Sevastopol branches of "Rosmorport" were established. Apparently, Russia takes all responsibilities related to the safety of navigation in Sevastopol and other ports of Crimea.

According to the Ukrainian Sea Ports Authority, a depressing situation with cargo handling emerged in the Crimean ports in March 2014: port of Evpatoria has reduced volumes by 31.4%, Sevastopol - by 35.2%, Yalta - by 81.9%, Theodosia - 25.6%, Kerch - by 72.5%.

Taking into account the geographical location of the Crimean peninsula, connected to the mainland by a narrow neck, and de-facto termination of active goods traffic from mainland Ukraine, it is assumed that almost all of 15 million tons of cargo handled in the Crimean ports in 2013 now will be processed in other Ukrainian ports. It is a common knowledge that lost cargo traffic hardly may be returned. The clear example of this is, for instance, the lost cargo volumes in Ukrainian ports on Danube River after Yugoslavian war. Even assuming that the cargo traffic will improve, the new customs barriers, delays on border, growing rates for transportation, etc. will not add to the competitiveness of the Crimean ports.

On April 3, 2014 the State Agency of Fisheries of Ukraine reported that SE "Sevastopol Sea Fishing Port" and SE "Kerch Sea Fishing Port" are the companies with a high degree of property risks. Due the impossibility to ensure the safety of navigation in those harbors, and security of cargo on their territory, all shippers and carriers are recommended not to arrange navigation and cargo handling there.

So the prospects to keep at least some cargo in the Crimean ports are associated mainly with the supplies to/from Russia. In general, it looks like Crimea will be considered much more as the large naval base, rather than a zone of cargo transshipment.

Vessel calls to the Crimean ports

At the moment, the most probable perspective is that the Crimean ports may be closed for the rest of the world. On April 15, the Ukrainian parliament adopted the Law which declares the Crimean peninsula as the “temporary occupied territory”.

It can be assumed that such measures will mean certain degree of isolation of Crimean ports from the international transport market. In fact, we can speak about banning the ships, called at ports of the Crimea, from entering the ports of Ukraine. This system was tested in Cyprus in connection with the occupation of Northern Cyprus in 1974. Despite the progress in resolving that political conflict, until recently the masters of vessels calling at the ports of Northern Cyprus were subject to criminal penalties, including imprisonment. It is commonly known that tracing the route of a ship is not particularly difficult today with using the AIS and other services.

Registration of ships

There is an ambiguous situation with Ukrainian-flagged ships which are registered in Crimean ports.

Recently the media reported that the Crimean “government” demands to return seven Ukrainian-flagged fishing trawlers, registered in Sevastopol, to their home port. Currently these trawlers are fishing in different regions of the ocean. The Ministry of Agrarian Policy and Food of Ukraine announced that Ukrainian fishing fleet will be temporarily registered in port of Odessa.

On April 7, the State Agency of Fisheries of Ukraine gave its comments regarding the possible registration of fishing vessels in the Russian shipping register. It was stated that, in accordance with the international law, any state, before entering a ship in its register of ships, should assure itself that the previous registration, if any, is deleted.

Cruise navigation

Unfortunately, the development of cruise shipping in the Black Sea, with ??the port of Odessa as one of the leaders, now becomes questionable, since known cruise operators MSC Cruises and Costa Cruises have already redrawn the schedules of their cruise vessels and cancelled calls to Yalta and Sevastopol. Instead the vessels will increase the staying in Istanbul, and add new ports, like Burgas. It is hoped that the number of cruise ships visiting Odessa will be restored after the normalization of the situation; however, the expected growth seemingly is not to be seriously considered now.

Search and Rescue service

Two maritime search and rescue coordination centers of the state company «Maritime Search and Rescue Service", were operating in Sevastopol and Kerch. Three shore GMDSS facilities were located in Crimea as well. Upon the annexation of Crimea, the respective infrastructure fell under control of Crimean “government”, and the Ukrainian system of maritime Search and Rescue was deeply affected. At the moment, all SAR technical facilities are disconnected from informational networks, coordination centers ceased to operate, and rescue vessels are relocated from the territory of Crimea. In fact this means that currently no SAR operations may be carried out in the waters near Crimea.    

The Kerch Strait issue

The legal status of the Kerch Strait is now a painful issue which unfortunately has no sound answer. But it is evident that some changes in the status thereof (even temporary) will take place. At the present moment all treaties between Ukraine and Russia are valid. One of them is the Treaty on Cooperation in Using the Azov Sea and the Kerch Strait (signed on the 24th of December 2003 in Kerch) which states that historically the Azov Sea and the Kerch Strait are deemed as the inland waters both of the Russian Federation and of Ukraine. Settlement of disputes regarding water area of the Kerch Strait had to be the subject of further arrangements between Ukraine and the Russian Federation.

Agreement on Security Measures on Safe Navigation in the Sea of Azov and the Strait of Kerch (signed on the 20th of March 2012 between the Russian Government and the Cabinet of Ministers of Ukraine) developed the arrangements between Russia and Ukraine for a peace time. Since the status quo has changed, pretensions of the Russian Federation in respect of waters of the Azov Sea will probably grow to the level of 8/10 in favour of Russia. Hereby the navigation in the Kerch Strait will be controlled solely by Russia, and the transits of the Ukrainian-flagged and third countries flagged vessels to sea ports of the Azov Sea will become a subject of Russian legislation.

We do believe that foreign vessels will pass the Strait of Kerch without any limitations, however some concerns remain. Our Polish colleague mentions, for example, that Poland faces a similar experience with the Baltic Strait being blocked by the Russian Federation, despite the fact that it serves as transit way not only to Kaliningrad but also to Polish waters (Vistula Lagoon or the Bay of Kaliningrad). It is most commonly explained by the fact that Kaliningrad and Baltiysk are important military bases.

In summary

What should we keep in mind eventually?

First of all, there are unpredictable risks related to shipping and transport activities in Crimea. It is a matter of fact that current situation is not settled legally. Under these circumstances, the perspectives of maritime sector look pale.

The questions may arise endlessly. Just a couple of examples: there are no own container terminals in the Crimea, so how will containers be delivered there? What will happen to Sevastopol and Kerch seamen’s books and diplomas? Will offshore transshipment in the Strait of Kerch remain “offshore”, since it generally took place in “grey” area beyond the territories of Ukraine and Russia?

We cannot rely upon quick settlement of these and many other issues regarding situation in the Crimea. Unfortunately, such issues may be settled not only for months but even for years.

Therefore the story to be continued…

Published for Maritime Advocate.

Arthur Nitsevych

nitsevych@interlegal.com.ua