Shipping Companies
Like its more famous airborne counterpart, Aeroflot ("air fleet"), the Soviet state shipping company, Morflot ("sea fleet") was divided up into regional divisions. The three mainly involved in passenger shipping were the Black Sea Shipping Company (BLASCO) of Odessa, the Far Eastern Shipping Company (FESCO) of Vladivostok, and the Baltic Shipping Company of Leningrad.
Sovcomflot was the first Russian shipping company established according to international shipping practices. Sovcomflot started with the USSR Government's decision to overcome indirectly the state monopoly of the foreign trade by applying of the long-term leasing scheme called "Bare-boat Charter" for purchasing of modern and second-hand vessels. For this reason a special resolution was adopted by the Government of the USSR in 1973 and after having gained some experience a Fund for Commercial Operations within the Ministry of the Merchant Marine of the USSR was established in 1976. This fund was created on the basis of the profit received from bare-boat charter vessels' operation and realization of some commercial transactions. The first ships purchased were two bulk carriers of about 40,000 dwt each "Sovfracht" and "Sovinflot". In the next 15 years more than one hundred vessels of various types were acquired via Bare-boat charter scheme.
Joint-Stock Company “Sovcomflot” roots back to 1988 when it was established on the basis of the Fund of Currency Commercial Transactions of the USSR Ministry of Merchant Marine. Such a status of a shareholding enterprise was unique in those days. Sovcomflot was set up by the Resolution of the USSR Council of Ministers and was specially authorized to operate in foreign markets. The company was incorporated by the USSR Ministry of Merchant Marine in co-operation with the major shipping companies of Russia acting as founding shareholders. By 1990 the total deadweight of the Company's fleet ammounted to 1.8 million dwt. At this period Sovcomflot was transformed into a Russian joint-stock shareholding company with 100% of its shares being the property of the Russian Federation.
Sea transport has been denationalized, but 10 major regional shipping lines remain from the Soviet era. They compete with new shipping companies, but most competition comes from foreign shipping companies, which handle some 60 percent of Russian foreign trade traffic. Many Russian ships were actually transferred to foreign registry themselves, to be used as collateral for loans for new building. The fleets remaining under Russian registry are much smaller than they used to be and are old, badly fueled, and require large crews. Competition from the Baltic states -- which got more investment during Soviet times than Russian ones and whose ports tend to be better sheltered and more accessible -- has been severe. In the Far East, the ports have fared better because of a lack of foreign competition and their easy access to Northeast China, which is generating transit traffic. In 1993, the government -- particularly concerned about ensuring deliveries to the North -- announced a program for a revival of the Russian merchant fleet, which involved government financing and guarantees. For the most part, however, the promises of funding have not been fulfilled.
Passenger transport by sea has virtually disappeared, and the ships have been sold abroad or used as cruise ships by foreign lines with Russian interests.
Murmansk Shipping Company, owned by Lukoil, is financially moribund. Far East Shipping Company (FESCO), owned by former energy minister Sergei Generalov, is mostly involved in container shipping. Primorsk Shipping Company, which works in ice-class shipping for offshore oil and gas, is fully private.
Rosnefteflot is the former Far-Eastern Maritime Company (FEMCO) established on the basis of the Far-Eastern Maritime Department of Exploration Drilling. It has got more than 25 years of successful experience in operating all the types of drilling rigs in the Far-Eastern area. The company is in-house technical manager of JSC Rosneft offshore projects, operates the first and only FSO unit in Russia -“Belokamenka” in the Kola Bay and as well as the port fleet at the Rosneft terminal in Nakhodka. Rosneft is one of the largest Russian oil and energy companies.
On 26 January 2006 Sovcomflot and Rosneft agreed to team up in technical management of Rosneft’s offshore, terminal and shipping activities and to form a joint venture on the basis of Rosnefteflot, the technical manager of Rosneft fleet and terminals. When Novoship President Tagir Izmailov expressed opposition to the proposed merger with Sovcomflot, he was charged with abuse of position and money laundering, and subsequently fled to London. In December 2006, the ex-chairman of the subsidiary Novoship-Invest, holder of 6.5% of Novoship Invest, shot himself after being summoned for questioning.
By February 2007 Russia's Minister for Economic Development, German Gref, had agreed to a limited tie-up between the state shareholdings of the two companies. However, he opposed a merger which would consolidate the two companies into a single shareholding. Other agencies opposed were the Russian State Property Agency, and the Ministry of Transport.
On 20 June 2007 Russian President Vladimir Putin signed the decree merging the state package of Novorossiysk Shipping Company (Novoship) into Sovkomflot’s registered capital. A total of 67.1 percent of Novoship shares (owned by the Federal Property Management Agency) will be merged into the registered capital of 100-percent-state-owned Sovkomflot. Thus, a company worth $5 billion and fifth-ranked in the world for its tonnage, was created. About 19.67 percent of Novoship shares belong to Novoship’s subsidiaries Intrigue Shipping Inc. and Novoshipinvest.
The newly merged Sovcomflot and Novoship shipping companies operate under their new title “Sovremenny Commercial Fleet”. ‘Sovremenny’ means ‘modern’ in English and the new combined operation brings together the tanker fleets of the former Sovcomflot, Novoship and Rosnefteflot under one management led by former Minister for Transport, Sergey Frank [who became head of Sovkomflot President and CEO in autumn 2004]. The new company is to operate the most modern tonnage and provide an indispensible link in the transport chain for Russia's future oil and gas development.
St Petersburg, Russia’s undisputed maritime capital, is home to key government maritime departments as well as the corporate headquarters of leading industry concerns, including significant sectors of the Gazprom Corporation. It is home to the newly established United Shipbuilding Corporation and accompanying shipbuilding and maintenance technology center as well as the Sovremenny Commercial Fleet.
Apart from a couple of news releases, there was otherwise no attestation of a "Sovremenny Commercial Fleet". The nomenclature was a bit puzzling, since it replicates the nomenclature of one of the three corporations it was to consolidate, "Sovcomflot" ( which means Modern Commercial Fleet). The regular meeting on 20 September 2007 the Sovcomflot Board of Directors considered a number of operational, financial and procedural issues related to the Group’s performance, but made no mention of combined operations.
JSC Sovcomflot is one of the biggest Russian shipping companies owning the fleet of 52 vessels of total 4.1m dwt as of 2007. The company specializes in energy shipping. Out of the total amount, 41 vessels are tankers of total deadweight of more than 3.9m tons. All the tankers are double-hulled with average age being 5.0 years. JSC Novoship is one of the biggest Russian shipping companies owning the fleet of 58 vessels of total 3.55m dwt as of 2007. All the tankers, mostly Aframaxes and product-carriers, are double-hulled with average age being 10.4 years.
JSC Sovcomflot and JSC Novoship successfully participated in a competitive sale process and on 02 August 2007 entered into agreements for the joint (50/50) acquisition of W.W. Marpetrol, S.A. (Marpetrol), a leading Spanish chemical tanker company with its headquarters in Madrid. Marpetrol owns and operates a fleet of 12 modern chemical carriers. The acquisition marks Sovcomflot’s and Novoship’s expansion into the chemical tanker market and further broadens the range of shipping services the companies offer to their international and Russian clients. This move reflected the Kremlin's desire that Russian companies swallow rather than be swallowed.
On 04 October 2007 presidential aide and Sovkomflot's board chairman Igor Shuvalov said that "All legal procedures relative to the Sovkomflot-Novoship merger are slated for completion by the end of the year" – adding that "a new company will be incorporated that will comprise all shipping facilities in Russia".
The state's stake in Novoship's equity capital was contributed to Sovkomflot's charter capital, which implies legal independence of the companies. State authorities have selected possibly the best merger option for their interests. On the one hand, they could take advantage of all benefits from joint operations in order to boost their own financial indicators. On the other hand, Novoship's minority shareholders will benefit from more clearance around the merger.
By 2008 the Sovcomflot fleet comprised 132 vessels of various types which were built in Russia, Japan, South Korea and Croatia under the supervision and in compliance with the requirements of the Russian Register of Shipping and International classification societies. Highly sophisticated vessels built and operated in compliance with raising international standards of safety and marine environment protection, management of the vessels - both technical and commercial - at a level corresponding to the world freight market requirements contributed a lot to the recognition of Sovcomflot as a safe carrier and reliable partner and strengthened further long-term relationship of the Company within international financial and industrial sphere. New Sovcomflot tankers, which are constructed and operated under supervision of Lloyd's Register, has been assigned the additional class notation "EP" (Environmental Protection), starting from 2005.
