The Daily View: Flying the flag

THE CHOICE of flag for a ship used to be an unremarkable commercial decision, akin to shopping around for the best insurance deal.

Now it is more often a geopolitical calculation based on operational requirements.

As shipping is increasingly weaponised in trade wars, flags and ownership affiliations matter more.

We are seeing increased movement across the industry as owners either choose sides, or hedge their bets.

At the top of the industry, flagging is still strongly influenced by deal making, but it comes with increasingly politicised context.

Mediterranean Shipping Company moving 12 vessels under the Indian flag, following a meeting with Prime Minister Narendra Modi during India Maritime Week in Mumbai, was couched in the language of strategic long-term partnership.

CMA CGM chief executive Rodolphe Saadé has been carefully talking up the French flag, having spent the first half of the year cosying up to the Trump administration with an investment promise of $20bn over four years in the US, with plans including an increased use of the US flag.

In the midst of a French budget crisis and trade tensions with Washington, it pays to be recommitting to le drapeau tricolore, at least domestically, regardless of any concerns regarding tonnage tax changes that the French line may have previously voiced.

At the other end of the market, flagging choices is much more directly and overtly associated with operational access to markets.

The fluid dynamics of flag hopping among the sanctioned fleet has been a game of obfuscation rather than affiliation, but flag choices matter.

The rapid rotation of ship registrations from fake flag to poorly performing flag has to date merely been a question of cover to stay ahead of the next phase of sanctions enforcement. The fact that we are now seeing sanctioned ships exit this pattern and seek more permanent refuge in the national flags of Russia and Iran marks an interesting evolution in the bifurcation of trading dynamics.

Is this the final phase of a more permanent parallel fleet and the emergence of a parallel industry with all the infrastructure and systems required, dividing down geopolitical lines?

For the non-sanctioned element of the shadow fleet, opacity is a priority but there are still significant swathes of deceptive shipping practices being carried out of ships flagged by some of the largest registers.

The same applies to the ownership structures and technical managers behind them.

Flagging is just part of a much wider series of changes that will have to be considered if shipping’s national affiliations, origins and trading history are going to determine access to markets.

But the decision over which flag to fly is no longer simply a commercial decision.

Richard Meade
Editor-in-chief, Lloyd’s List

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