IN a world where shipping has moved from commercial logistics to strategic national security infrastructure, the old models of flag-based compliance and insurance-driven risk are no longer sufficient.

As shipping is increasingly weaponised in trade wars, flags and ownership affiliations matter more.

We are tracking increased movement across the industry as owners align flag register and company registration choices down geopolitical lines.

Regardless of what happens next with sanctions, the continued movement of ships into the Russian flag this month points to a rapid politicisation of shipping registries.

The concerns voiced by the Marshall Islands regarding the quality issues association with what they deride as “Mickey Mouse” flags are largely justified. Bad flags have always existed, but the proliferation of fraudulent registries and the speed of flag-hopping from shadow fleet operators all points to a global system of registration that is unfit for purpose and in need of reform.

That is unlikely to happen quickly, which leaves shipping considering flag risk in the context of national security agendas.

Ships are being assessed by security services and commercial counterparties on the basis of trading history, compliance traceability and affiliations. Flag state associations matter because they, along with beneficial ownership, will increasingly determine which markets ships can trade into.

When the European Commission unveils its long-awaited maritime industrial strategy next month it will contain a strong push towards getting European shipping back under European flags. Don’t mistake this for some nostalgic bid to bolster member state business.

According to the European Commission, enhancing the attractiveness of EU flags is a condition to reinforce the Union’s position in global trade. The unreleased drafts we have seen talk about safeguarding lines of communication, building the strategic autonomy and strengthening the EU’s ability to shape global norms and policies on safety, security, labour and environmental protection.

In much the same way that the forthcoming EU port strategy will trigger an urgent bloc-wide review to “mitigate risks of foreign ownership, operational control and equipment from high-risk suppliers”, what we are seeing here is ingestion of shipping into national security frameworks.

Expect moves to limit foreign (read Chinese) ownership, control and operation of critical infrastructure which will, in the case of ports, increasingly be viewed as strategic dual-use infrastructure for military mobility and security.

Expect moves on state aid guidelines to bolster national flags and a high level review of flag state requirements. But there is also talk of new incentives prioritising EU-flagged vessels within national administrative processes by smoothing inspections, port waiting time and generally making it easier and more attractive to be a “European” ship.

The choice of flag for a ship is no longer just a commercial decision — it is increasingly a geopolitical calculation of risk.

Richard Meade
Editor-in-chief, Lloyd’s List

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