Sanctions have made many ocean carriers change the registry of their ships to countries that are not involved in enforcing them.
Cyprus is one such flag state. As a member of the EU, Cyprus follows their policies on sanctions, which are among the strongest. So ships registered in Cyprus may not carry Russian cargoes.
Shipowners who want to trade Russian or Iranian goods, such as oil, can’t do it with Cyprus-registered ships. So they flag them elsewhere.
The Cypriot registry has lost about one-fifth of its tanker registry since sanctions were imposed on Russia. According to 2021 registry figures, Cyprus was 11th in dead weight tons (DWT) registered among the registries of the world, with over 1000 ships registered (not all tankers). This is a significant loss of revenue.
Cyprus is going to apply to the EU for compensation for the loss of registrants.
I’m not sure this is how to deal with the problem. There’s plenty of evidence that flag states are not dealing very well with environmental, social, and governance (ESG) problems in their own countries. By World Bank measures, there has been little improvement on many of their 68 ESG measures in Cyprus and other countries. They are thus less likely to be good enforcers of cooperative goals such as sanctions or emissions. Paying them for losses doesn’t seem like a good strategy.
There are already requirements for Cyprus to follow EU sanctions rules. As a flag state Cyprus needs to get approval from the EU for such rules as a tonnage tax discount. I think this is just following the rules they agreed to when Cyprus joined the EU.
David Glass | Feb 20, 2023
Cyprus seeking EU support for shipping industry sanctions impact
Supply Chain and Logistics 