Sovcomflot’s EU operations cease but UK extends sanctions wind-down
The 150 staff employed by Sovcomflot’s Cyprus technical operation are unemployed following the expiration of Europe’s sanctions wind-down period, but the UK has extended a window of opportunity to help give time for vessel sales to go through
At least four members of the Sovcomflot executive board, including long-serving executive vice-president and chief financial officer Nikolai Kolesnikov, have stepped down in the wake of western sanctions targeting the tanker giant. Sovcomflot’s Cyprus office has now been closed and the remaining UK operations are being directed by Moscow management
THE available window of opportunity for western shipowners to buy Sovcomflot vessels appears to have been extended after the UK government granted more time for businesses to wind-down links to Russian tanker giant Sovcomflot.
Both EU and UK sanctions wind-down periods were due to expire on May 15, however the UK’s Office of Financial Sanctions Implementation extended its General Licence related to specific dealings with Sovcomflot until June 30.
The extension comes as Sovcomflot is racing to sell dozens of vessels in order to pay back loans to Western banks and reduce its fleet in anticipation of long-term trading opportunities remaining significantly curtailed due to international sanctions imposed against Russia.
ING Bank, which is representing a consortium of eight western banks winding down their exposure to Sovcomflot, declined to comment on the extension, however it is understood that vessels are being sold via western banks in addition to transactions being conducted directly with Sovcomflot.
While the UK sanctioned Sovcomflot’s UK arm in March and imposed an asset freeze on parts of the business, the extension of the General Licence effectively allows times for those vessel sales to go through without any risk of the UK government taking direct action against those involved in the transactions.
It is not clear, however, whether transactions are still being conducted through Sovcomflot UK given that most senior management are understood to have stepped down in the wake of sanctions being imposed.
Nikolai Kolesnikov, executive vice-president and chief financial officer of Sovcomflot, is understood to have stepped down from the company on March 24, along with at least four other senior executive board members based in the UK and Cyprus.
Mr Kolesnikov, who had worked at Sovcomflot for over 17 years, is a UK citizen and it is understood that he will continue to live in the UK.
Sovcomflot’s international financial and technical operations had been run out of its Cyprus office which employed around 150 staff. Operations had already halted in SCF Management Services Cyprus, Sovcomflot’s Limassol-based operations centre, however, with the sanctions wind-down period in the EU now over, the Cyprus operation has ceased trading and the 150 staff are effectively redundant.
In the UK, 15 staff worked at Sovcomflot’s Finsbury Square offices.
Lloyd’s List understands that all operations have now reverted to Moscow headquarters where the remaining management team are focused on recalibrating domestic operations and the remaining international trade with largely Asia partners.
According to sources close to Sovcomflot’s operations, the immediate strategy is to shrink and reposition operations to fit the available trading opportunities that remain open to Sovcomflot. A significant portion of that will be domestic for the moment and will likely involve increased business with Russian partners including Rosneft and Gazprom.
The extension of the UK General Licence for Sovcomflot will not reverse the process of Western class and insurance providers withdrawing services to Sovcomflot vessels.
According to senior officials in both P&I Clubs and class societies still in the process of exiting Sovcomflot arrangements, the fact that the EU wind-down period has not been extended means that they will not be able “to alter their current approach towards Sovcomflot”.