War. What is it Good For? Shipping..

In times of conflict, there are usually winners and losers. Rather oddly, when it comes to war, the shipping industry usually emerges rather well from it all on both sides. Given the horrific events unfolding in Ukraine, it is perhaps a useful time to think shipping reacts, and what it means when it all kicks off.

BALANCE SHEET

First thing first this isn’t about grey ships with guns. So, forget your military. We are talking about commercial shipping, about cargoes, the Merchant Navy, Merchant Marine, whatever you choose to call it.

The big thing to remember about war (or even the threat of it) is that it creates a positive business environment. That is perhaps the most tragic irony, that while some people and places lose everything, there is suffering, despair and loss, some gain massively. War at a micro and macro level produces winners and losers, not just at the end, but throughout.

For a story of how shipowners prosper out of conflict, it is perhaps worth considering the modern Greek maritime industry and its success out of WW2. During the war, Greece was occupied, split between Italy, Bulgaria and Germany. With a government in exile, they fought a brave resistance, eventually being liberated in 1944. That was only the start of the problems, with its economy and infrastructure in ruins, a civil war further shattered the nation.

A terrible mess, but from the flames rose a phoenix, Greek shipping. A fleet that grew from trading on a pure, competitive and truly international basis. They swooped for ships when they were cheap and sold when they were expensive, hoovering up old war tonnage, and feeding the post-war world with grain especially. They swashbuckled into global markets. A success which means today Greek shipowners and shipping companies control almost 20% of the world’s tonnage. A staggering figure.

SHIPS AND WAR

So, if we put to one side the ugly reality of war. If we suspend disbelief and embrace the tough love, “war is needed” view. Then we suddenly see that the disparities created are an opportunity for ships.

The business of shipping is about being in the middle of supply and demand. Shipping is fundamentally an economic driven, economic driver. You have something, we can move it. You want something, we can move it.

There is a beautiful duality about shipping. It is the equals sign in the middle of each trade equation. Every action and reaction, everyone has to look to the sea and move things. Shipping becomes that vital pillar of all sides, and of all needs.

Suddenly with ships in demand, with uncertainty fuelling buying sprees, then the price of shipping rises. Freight rates begin to climb, and pockets get lined. People on both sides of the conflict lines need and want, and so they have to be moved by ships.

FUELLING CONFLICT

Ships have a vital role in war. Probably the most compelling impact of war and shipping is that of WW2. The “Battle of The Atlantic” was a running and constant campaign through the entire period of the war, and tens of thousands of civilian seafarers lost their lives. Bravely battling U Boats and the elements to feed and fuel a nation.

There have been other more recent conflicts in which shipping has had a unique role. The Iran-Iraq conflict in the 1980s was dubbed the “Tanker Wars”, as each side sought to cripple the supply of oil from the Gulf. They took to attacking merchant shipping, and once again seafarers going about their jobs were caught in the literal and figurative crossfire.

It represented the most sustained attack on merchant shipping since the Second World War and resulted in over 400 civilian seafarers killed, hundreds of merchant ships damaged and substantial economic losses.

Then we have the Falklands War — not a conflict that involved trade flows or risk of shortages, but one which would not even have been made possible without the “Ships Taken Up From Trade” (STUFT). As the UK brought in tonnage to make a Taskforce possible to get the men and machines needed over 8,000 miles away. The loss of the Atlantic Conveyor saw the loss of 12 seafarers.

RISK V REWARD

Aside from the very real and tragic losses which all too frequently hit shipping in times of conflict, it can be a very lucrative time indeed. The demands to move things, the loss of tonnage and resulting scarcity make it a time of great risk and perhaps even greater reward.

Though we are talking in a financial sense here. The real-life risks were, are, and always will be, borne by seafarers. War is a time of even heightened sense of that sacrifice and brings the hardships faced by those at sea into focus.

In war, we do get to understand a little more of the brave and hardy souls battling the Atlantic in WW2, braving Exocet missiles in the Gulf, facing down Mirage jets in the Falklands. They are always the forgotten heroes. While shipowners get rich, seafarers have always just hoped to stay alive.

It isn’t just about safety, it is about respect too. In WW2, mariners were even considered layabouts and rogues. It took poster campaigns and propaganda to get the message to the home front, that without these brave men the war would be lost. “The Lifeline holds strong” was the message, and it was seafarers making that possible.

THINK OF SEAFARERS

In a conflict as in peace, merchant seafarers are the lifeline. Ships mean that food and fuel can reach us, and make the difference between winners and losers. Sadly though, it is so often the seafarers who suffer. Today, as the world skirts dangerously close to a major, big power conflict it is an important time to think about what it all means, especially as insurers have now designated the seas off Ukraine a war risk zone.

What flows from the Black Sea into Europe and beyond? What will be the impact? Shortages? Price rises? More than that though, there is likely to be a human cost as seafarers are left to run the gauntlet. Already Russia has said that vessels operating in the vicinity of its live-fire drills are under threat. While allegations are flying that the actions in the Black Sea and Sea of Azov amount to a blockade.

Losing access to the Black Sea would have devastating consequences for the Ukrainian economy. Large scale exports such as steel, coal, fuel and petroleum products, chemicals, machinery and transport equipment and grains like barley, corn and wheat will be impacted.

Meaning they will likely have to be sourced elsewhere, thus more cargo miles, meaning more ships having to sail further for longer, with time spent waiting…a war, even the threat of war skews the shipping market. With money to be made, but sadly concerns over the safety of seafarers too.