Emergency Funds Keep Cyprus Tonnage On The Move

Although most ships flagged or managed in Cyprus appear not to have been disrupted by the prolonged closure of banks during the island’s bailout crisis, it could be a different story for shipping firms with deposits at the two banks subject to the haircut agreed last weekend.

With banks now likely to remain shut at least until Thursday, and fallout from the deal between Nicosia and its creditors not yet clear, it has emerged that the country’s shipping sector has maintained emergency access to funds to keep ships moving around the world.

“The government of Cyprus has clearly understood that payments for ships out on the oceans are as necessary as payments for the national power grid, the import of oil and other vital needs,” said Cyprus Shipping Chamber president Eugen Adami of Mastermind Shipmanagement.

According to the chamber, the understanding with the Central Bank of Cyprus covered national-flag vessels and ships managed by the shipmanagement sector based on the island, which has an international hue.

However, the paperwork requirements were strict and the release of funds “very controlled”, said Capt Adami.

“It is not an easy procedure — nor should it be,” he said. “There is a full audit trail to show that all the payments have been legitimate.”

Capt Adami said it would have been unacceptable to prevent companies with positive bank balances paying dues that could have delayed vessels.

Many shipowners and shipmanagers based in Cyprus have affiliates abroad. Several are of German origin and sources among them said in most cases, the ship accounts were likely to be held in banks overseas.

It is widely accepted that some companies may be stung badly, simply by having substantial amounts deposited either at the Bank of Cyprus or at the second-largest bank, Laiki, which is to be wound down.

Depositors with more than €100,000 ($128,500) at either bank will bear the brunt of the haircut agreed with Europe to fund Cyprus’ tranche of its own bailout.

As of Tuesday, however, the percentage of deposits to be grabbed had not been clarified.

“I do not think there will be a traumatic long-term effect for the shipmanagement industry,” said Columbia Shipmanagement managing director Dirk Fry, Capt Adami’s immediate predecessor as chamber president.

“But it is not funny that banks have been closed for 10 days and our employees are badly affected.”

Columbia, which has 266 vessels under full management and 144 under crew management, is one of the longest-established managers in Cyprus.

Asked whether the crisis could undermine the company’s status on the island, Capt Fry said: “No, I don’t think so.”

Capt Adami was similarly confident the crisis would not drive Cyprus into meltdown as a shipping hub.

“I think the worst has already happened,” he said. “I believe that Cyprus is and will stay part of the [European Union].

“After this, there will be a smaller financial sector, obviously, but what remains will be stronger, well-funded and well-governed, so I do not think there should be confidence issues in the long term.”

According to Bank of Cyprus figures, sea transport makes a substantial contribution to the country’s balance of payments.

In 2011, the last full year for which figures have been compiled, the sector brought in €1.3bn and netted €708m after debits. Of the net amount, €179m came from freight transport and €529m from supplies and ancillary services including shipmanagement services.

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