Cyprus has suggested automatic renewals of tonnage tax systems as one of a series of measures to halt defections and bolster the shipping industry hit by European sanctions on Russia, its shipping minister said.

The recommendation is one of several the island, which has one of the largest shipping registries in the EU, has made to Brussels as part of a sector-wide support package for the oil price cap which came into effect on Dec. 5. It was conveyed to the European Commission this week.

Tonnage tax is a system where ship owners or operators can opt to pay an annual tax calculated on the basis of the carrying capacity of a ship rather than profit. It is subject to reviews by the European Commission, with the present regime in Cyprus’s case extended in 2019 for a 10-year period.

“Imposing sanctions is the right thing, but at the same time we need to support a sector that inevitably faces some harmful effects,” Vassilios Demetriades, Cyprus’s Shipping Deputy Minister told Reuters.

The Group of Seven nations, Australia and the 27 European Union countries imposed on Dec. 5 a $60 cap on seaborne Russian crude, aiming to reduce Moscow’s ability to finance its war in Ukraine and preserve stability on the global oil market.

All those countries combined, Demetriades said, only control 17.5% of the global tanker fleet.

The island has the third largest ship register in the EU, after Malta and Greece. Although its oil tanker fleet is not large – about 10% of the total vessels on the Cyprus register – between October and December of 2022 it lost an estimated 20% of its tankers when talks on an oil price cap began.

The EU Commission has committed to adopting supportive measures for the sector by Feb. 5.

None of the measures Cyprus suggests have budgetary implications. They would provide a clear message to the shipping industry of its value as a strategic asset pivotal to ensuring the energy independence of Europe and its green agenda, the Cypriot official said.

“The issue is not (about) compensating Cyprus or any EU member state for losing business. The issue is to keep shipping in the EU, to bring back any ships which de-flag,” Demetriades said in a telephone interview.

“One of the measures of Brussels could be, for those member states that already have EU tonnage tax approved systems, (that they) could be automatically prolonged for another 10 years, for instance.”

Ways to boost Europe’s shipping sector should also be more prominent in the external relations of the bloc with third parties, Demetriades said.

Agencies

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