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CircularsNews
February 2023

Russian military exercises/drills at the Black Sea on 13-19 February 2022 & Russian Invasion

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

To the attention of our business partners;

Please be informed that a local correspondent company in Russia, named Axis Ltd, has recently circulated attached self-explanatory e-mail message regarding the news about the military exercises / drills of Russian Navy in Black Sea and Sea of Azov including Kerch Strait. Axis has checked the validity of the news and stated that there is currently no such blockage for the merchant vessels passing through mentioned areas except from the periodic exercises being performed at temporarily dangerous areas, the list of which is also attached (as prepared by Axis). You may also find all referred bulletins and warnings as attached to this e-mail.

In a nutshell, the relevant circular is shedding a light whether the news about Russian military drills occupying some areas at Blacksea & Azov thus preventing navigation of merchant vessels, is true or not. Axis says that there is currently no safety concerns for the merchant vessels calling to Ukranian and Russian Ports. However, the current navigational warnings must be followed carefully. For further reading, we attach relevant e-mail of Axis along with referred enclosures. You may also read further details of recent news from below given links:

https://function.mil.ru/news_page/country/more.htm?id=12408117@egNews

https://mfa.gov.ua/en/news/statement-ministry-foreign-affairs-ukraine-decision-russian-federation-block-parts-black-sea-and-sea-azov-and-kerch-strait

https://www.themoscowtimes.com/2022/02/10/russia-readies-for-naval-blockade-of-ukraine-ahead-of-missile-drills-reports-2-a76321

https://iz.ru/1289488/2022-02-10/v-kremle-oprovergli-blokirovku-korabliami-rf-torgovykh-putei  

https://www.unian.net/war/gotovit-novuyu-podlost-rf-vnezapno-otmenila-blokadu-azovskogo-morya-novosti-donbassa-11700448.html

https://structure.mil.ru/files/BULL_2208.pdf

In addition to above, we have received attached news from Axis (on 15.02.2022) related to Russian Invasion. Despite the hot topic that Russian Invasion can start any time, Axis says that there is currently no safety concern for the vessels calling Ukranian and Russian Ports in Blacksea and Sea of Azov. You may reach recent news on Russian Invasion from https://www.bbc.com/news/world-europe-60355295.

While Ukraine has called for a meeting with Russia regarding the military exercises on country’s borders, Russia in the meantime, reportedly has started planned navy drills in Black Sea in line with previously drill announcements: Russian Navy to hold exercises in all zones of responsibility Jan-Feb - Military & Defense - TASS

Axis has stated that there is currently no safety concerns for the vessels calling at Ukranian and Russian Ports and the only recommendation to the masters is to pay attention to the current navigational warnings, not to enter to temporarily dangerous areas where the regular military exercises are ongoing. If the vessels accidentally approach to areas where military exercises are ongoing and thus closed to navigation, then Russian navy will warn those vessels to change their courses.

While the tension between Russia and Ukraine keeps building up nowadays, we hereby recommend you to check the latest position at mentioned areas with the local agents and correspondents before vessel’s calls/passages and pay utmost attention to the current navigational warnings. On top of this, attached new list has been published by the Joint War Committee dated 15.02.2022 and your broker should contact you to inform as to when this new list will be effective.

Best regards,

Omni

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