On Friday, January 13, the shipping minister of Cyprus announced a string of measures to boost the shipping industry reeling under the effect of deflections resulting from the sanctions on Russia. One of the suggestions was to renew the tonnage tax system automatically.
Being one of the largest shipping islands in the EU islands, the country suggested this to the European Commission as the December 5 price cap on fuel is affecting them.
On December 5, the European Union countries and Australia announced a Russian crude oil cap of $60 in a move to limit Russia’s ability to finance the Ukraine war. However, these countries make up 17.5% of the tanker fleet available worldwide.
In contrast, Cyprus is a key market player, the EU’s third-largest ship register. Despite not having a large oil tanker fleet, 20% of their tankers lost out in Oct-Dec 2022 because of the oil cap. 10% of Cyprus-registered ships were affected.
This tonnage tax is what shippers pay annually depending on their carrying capacity and is reviewed by the EC. Cyprus had it checked and extended for ten years back in 2019.
Cyprus Deputy shipping minister Vassilios Demetriades reiterated this when he said that the shipping sector needs support from harmful effects, although sanctions are the right way to do things.
So far, the commission has assured of taking measures to curtail this by February 5.
Cyprus has underlined that none of the suggested measures affects the budget and pertains to helping Cyprus. Instead, they are strategic measures to stand by the shipping industry in the EU and prevent them from leaving the EU flag.
Cyprus says that the shipping sector should be a critical issue for discussion in the EU’s external relations when negotiating with third parties. Brussels should automatically extend the tonnage tax for ten years for member states having the system in place.
References: Reuters, XM