Russian marine and inland shipping companies last year sailed through somerough, crisis-hit waters, but still carried all the freight they were askedto. The sector is now looking for government protection and steady financingto get it through to calmer straits.

Sea Transport

The merchant fleet carried 36 million tonnes of freight, according topreliminary data, 26 percent less than in 1997. Alexander Lugovets, a firstdeputy transport minister and head of Rosmorflot, the Russian federal merchantmarine service, said that all of the world's major fleets saw similar dropsin the wake of the Asia crisis.

In Russia, the Asia crisis sent anticipated freight charter down 30percent, and with it the tariffs for carrying tanker and dry cargoes, by25 percent to 30 percent. Even Russia's most prosperous shipping companies,Novoship of Novorossiisk and Sovkomflot, ended 1998 without profits.

But Lugovets suggested things would have been different had the governmenttaken some protectionist action. Russian shipping companies, he said, carriedjust 1.3 million tonnes, of 4 percent of a total of 32.5 million tonnesof international Russian sea-borne cargo. This was compared with three-fifthsin 1997. The drop cost Russia more than $6 billion in lost revenues.
Net forex revenues by Russian sea shipping companies last year were$304 million, or $51.6 million less than in 1997. Sea shipping carried25,500 passengers, 12,600 fewer than in 1997.

Investments

The sector received 4.3 billion rubles, of which the equivalent of morethan $500 million in foreign bank credit, under the Revival of the MerchantFleet Program, endorsed by the Russian president. Seaport administrationsand shipping companies themselves provided 1.25 billion rubles of investment,and the federal budget another 100 million rubles.
Scheduled financing by the federal budget last year was met by just59.2 million rubles, or 31.2 percent, of which 54.8 million rubles wenton clearing 1996 and 1997 indebtedness. Financing of 114 million rublesis expected in the first quarter of 1999 to offset centralized indebtedness.
By preliminary counts, marine transport enterprises closed 1998 withreceivables of 6.886 billion rubles and payables of 5.092 billion rubles.

State Of The Fleet

Marine shipping companies last year received 23 new ships with a totaldeadweight of 800,000 tonnes. The overall tonnage at shipping companiesincreased by 7 percent.
Rosmorflot said most of the ships were acquired with foreign ship-buildingloans, which totaled $700 million to $800 million in 1998. The state-ownedSovkomflot had six chemical tankers, deadweight 47,000 tonnes each, builtin Croatia. Novoship took delivery of two 106,000-tonne tankers from Japan.Primorsk Shipping had four 45,000-tonne tankers built in South Korea. AndNorthern Shipping acquired four new log carriers.
Russian merchant shipping is now capable of providing large-containertransit services.
LUKoil Oil Co. had two ice-tankers built, one in Germany and one ata yard in Volgograd, to carry hydrocarbons from Arctic offshore fieldsto market. Another eight such vessels will be built by the year 2001.

Ports

Russian seaports last year handled 136 million tonnes of cargo, 2.3percent less than in 1997. Volumes fell by about 4.2 million tonnes mainlybecause of reduced transit via Russia's Far Eastern seaports. But throughputat the ports of St Petersburg, Vysotsk, Novorossiisk and Tuapse increasedby 3 million tonnes in 1998.
Port administrations and stevedoring companies provided most of the850 million rubles invested in development at seaports, which last yearsaw freight handling capacity rise by 4 million tonnes. Most of this wentup at Novorossiisk, St. Petersburg, Murmansk and Temriuk (Krasnodar territory),which gained a total of six new dock terminals for mineral fertilizersand oil products.

Inland Shipping

Freight volumes here fell by 6.1 percent to 100.4 million tonnes.
Even so, inland shipping companies fulfilled all of the Russian andforeign orders. They delivered 13 million tonnes of cargo to the Far North,1 million tonnes less than in 1997. Oil and oil product exports by inlandroutes and Northern shipping in 1998 contracted by and overall 4 milliontonnes. Inland shipping companies also less export and import grain, coal,timber and metals.
But as many as 28 companies posted higher figures, despite the Russiacrisis. Cargo volumes went up 86,000 tonnes at St. Petersburg-based NorthwestShipping, 164,000 tonnes at West Siberian Shipping, based in Tyumen, 918,000at the Moscow Shipping Company, 760,000 tonnes at Port Naberezhnye Chelnyin Tatarstan and 504,000 tonnes at Belskoye River Shipping in Bashkortostan.
But the biggest drops were 1.772 million tonnes in the Volga Basin,1.341 million tonnes in the Severo-Dvinsk, 1.343 million tonnes in theIrtysh Region and 1.33 million tonnes in the Lena basins. Volgotanker,which operates Volga shipping routes, carried 1.75 million less cargo thanin 1997.
International shipping volumes fell by 2 million tonnes in the lightof falling prices for oil and timber, European Union quotas for shipmentsof fertilizer and metal and a reduction in the number of ships on internationalroutes by 37 units. The biggest drops were on shipments of crude oil, grain,coal, timber and metals.
Shipping to the Far North looked in jeopardy at the start of the navigationseason, with local authorities and enterprises dithering over financesand the payment of transport costs, and late, insufficient financing fromthe federal budget to compensate some of the costs of shipping fuel andfoodstuffs.
But isolated Northern settlements received all they needed becauseshipping companies worked for an additional 10 to 15 days when rivers werestarting to freeze over. The port of Tiksi unloaded 43,000 tonnes of oilproducts in these conditions.
Inland shipping carried some 19 million passengers and tourists, 20percent fewer than in 1997. Ticket sales fell mainly on local routes, from24 million in 1997 to 17 million in 1998, because of flooding in the firsthalf of 1998 and drought in the summer, which made many routes un-navigable.However long-distance ticket sales on routes from Moscow to Astrakhan,Nizhnii Novgorod and St. Petersburg, were about level with 1997 at morethan 1.5 million. River transport carried more than 420,000 tourists, 100,000of them foreign, approximately as many as in 1997.
Things were made more difficult because companies saw hardly any ofthe scheduled federal and regional subsidies for short- and long-distanceservices.

State of The Fleet

Russian inland shipping authorities believe that 4,500 of the country'sfleet of 12,500 river vessels are due to be written off. But the companiesplying Russia's substantial system of inland waterways currently only havethe funds to order eight new ships for $30 million.
The transport ministry is particularly concerned about the state ofthe nation's fleet of river-sea vessels, which are the main earners ofvital foreign currency for inland shipping firms. The average age of Russia's700 such ships is about 18. Yet new international safety rules are aboutto come into force that would keep many of Russia's older river-sea shipsout of foreign ports. No more than 300 of Russia's 700 ships meet the requirements.Russian firms could lose 15 million tonnes and $160 million to $170 millionworth of business a year.
Russia under a special presidential program approved in 1993 - calledRevival of the Russian Merchant Marine - envisages the construction of120 new ships by 2000. But the federal government is now financing theprogram and shipping companies themselves cannot afford to build the ships.

Financial State of Affairs

River shipping suffered from a lack of budget funding to maintain andimprove shipping routes. And demand for transport services was variablein the first quarter of 1998. Receivables by the river shipping sectoras of Jan. 1, 1998 grew 2.4 billion rubles by the end of last year, andpayables of 5.4 billion rubles rose by 1.5 billion rubles.
Arrears on wages, payments to budgets and extra-budgetary funds grewlast year. Remittances to budgets came to about 1 billion rubles.
Revenues by inland shipping last year were 7 billion rubles, of which186 million rubles in pre-tax profits, and 9 percent higher than in 1997. Operating costs were estimated at 6.8 billion rubles.
 

The Inland Fleet In Winter

River-sea ships operate on international lines on Baltic, Caspian, BlackSea and Mediterranean routes after the summer navigation season has ended.They are chartered to foreign companies because Russia's inland watersare frozen from November to March. However Russian ship-owners are aimingto use their universal dry cargo ships and tankers all year round.
Nikolai Smirnov, a deputy transport minister, said Russia possessesthe World's largest medium-payload fleet capable of navigating inland orsea routes. And smaller boats with a payload of 4,000 to 6,000 tonnes arehighly popular among European charters. According to Rosrechflot, the inlandfleet service, Russia's 600 river- sea ships will carry more than 10 milliontonnes of foreign cargo during the three winter months and earn more than$100 million in hard currency, a third of the gross annual revenues ofRussian inland shipping companies. In December alone they carried morethan 3 million tonnes under foreign charter.

Tarrif Policy

Tariffs for shipments hardly changed in 1998. The Russian Ministry ofEconomics forecasts that inland cargo tariffs, though, will rise by 20percent in 1999.
But Smirnov said that 'many inland shipping companies have signed contractswith the railways and cannot raise their tariffs without their consent.'
Also, ship owners are wary that a tariff increase will affect cargovolumes.

Forecasts For 1999

Rosrechflot predicts that river shipping companies will carry 102 milliontonnes of cargo, of which 20 million tonnes on international routes. Inall, this would be 1 percent more than in 1998. Forex revenues from internationalinland freight could come to $374 million.
Gross revenues from shipping could be 8.2 billion rubles, and pre-taxprofits 308 million rubles, or 100 million rubles more than in 1998.