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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.

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.

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.

To maintain the effectiveness of existing sanctions, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on 01 September 2016 designated 37 individuals and entities under three Executive Orders (E.O.s) related to Russia and Ukraine. This action was part of OFAC’s ongoing efforts to counter attempts to circumvent sanctions on Russia, to assist the private sector with sanctions compliance, and to foster a diplomatic resolution to the conflict in Ukraine.

The Sovfracht-Sovmortrans Group was designated pursuant to E.O. 13685 because it operates in the Crimea region of Ukraine. Affiliated companies SMT-K and LLC Koksokhimtrans are being designated for operating in the Crimea region of Ukraine and being owned or controlled by, or acting for or on behalf of, directly or indirectly, the Sovfracht-Sovmortrans Group. Sovfracht Managing Company LLC is being designated for being owned or controlled by, or acting for or on behalf of, directly or indirectly, the Sovfracht-Sovmortrans Group. Finally, OJSC Sovfracht and CJSC Sovmortrans are designated for being owned or controlled by, or acting for or on behalf of, directly or indirectly, Sovfracht-Sovmortrans Group and Sovfracht Managing Company LLC.

The Sovfracht-Sovmortrans Group is a Russian shipping and logistics company comprised of several companies, including Sovfracht Managing Company LLC, OJSC Sovfracht, CJSC Sovmortrans, LLC Koksokhimtrans, and SMT-K, a unit of the group registered in Crimea. SMT-K, an abbreviation for Sovmortrans-Crimea, has offices in Simferopol and Kerch, Crimea, and is the operator for a ferry line between the previously designated Port of Kerch in Crimea and Kavkaz in Russia. LLC Koksokhimtrans is the registered operator and manager of two vessels that have served as ferries between Crimea and Russia. Sovfracht Managing Company LLC has oversight over OJSC Sovfracht and CJSC Sovmortrans. OJSC Sovfracht is the flagship company of the Sovfracht-Sovmortrans Group and specializes in transporting of general cargo, while CJSC Sovmortrans specializes in container shipping.

Beyond arms sales Russia has sought positions of influence. Reportedly, Ecuador, Nicaragua, Bolivia and Argentina have all granted Russia access to their airspace and ports. Russia’s only transoceanic shipping line to South America runs from Russia to Ecuador, and multiple countries have agreed to or are considering participating in Russia’s GLONASS satellite navigation system.

It is clear from what the Colombian law enforcement and intelligence communities are seeing in the Central Americas that there is a great deal of unaccounted for Russian shipping activity. The US doesn’t pay a great deal of attention to it because it comes off the Pacific Coast of Central America and then goes to Russia. It doesn’t come to the United States, so it is not something that the US monitors very closely.

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Page last modified: 23-07-2018 13:38:28 ZULU