KRON SHIPPING AN EXPERT IN MARITIME BUSINESS
Caspian Energy (CE): Mr. Aliyev, what way has the company gone since the very moment of its establishment up to now? How would you describe the process of Kron Shipping's establishment?
Tahir Aliyev, Director, Kron Shipping (UK) Limited: Kron Shipping (UK) Limited was registered on June 25, 2000 in the English & Welsh Companies Registry. Along with the independent activity carried out in the field of maritime business and law, before May 2005 the Company also acted as a representative office of Kron Shipping Co Ltd established in 1994, the first shipping company in Azerbaijan and the first private maritime company in CIS.
In May 2005 Kron Group of Companies underwent restructuring. As a result, at the moment London-based Kron Shipping (UK) Limited is a head office with a representative office in Azerbaijan operating on the basis of former Azerbaijan's Kron Shipping Co Ltd.
For over 12 years of its history the Company has gone a serious path of establishment that, of course, was quite thorny for young initiative beginners of this new business as they had no experience and good image in this specific area but possessed the store of good knowledge of the maritime industry. We succeeded because of the principle laid in the very beginning of the Company's formation. We have never started business without having competence in it.
CE: What is the core activity of the Company?
Tahir Aliyev: The Kron's activity covers almost all segments of the maritime business. The Company is an active member of special sea transport organizations, forums, conferences along with some transportation institutions of the United National Organization such as UNCTAD, BIMCO, FIATA, and INTERTANKO. The Company has been the member of the Azerbaijan Chamber of Commerce and Industry and the Caspian Integration Business Club since 1997 and 2006 respectively. It is interesting that Kron being an Azerbaijani company by origin started its business in the freight market of the Mediterranean, Black and Baltic Seas offering not only freight booking and freight search services but assisting some Greek, Russian and Italian investment organizations in establishment of shipping companies. At the same time we surely did not forget about Azerbaijan and assisted the Caspian Sea Shipping Company in conducting business in the international sea shipping market.
Today I can surely say the Company has found its niche in the maritime industry and on the expert level offers quite wide range of services that covers commercial and technical exploitation of the fleet, maritime law services; technology of voyages and ship & cargo management, arrangement of safe navigation process; development of new and optimization of existing highways, participation as an expert in elaboration of maritime legislation of some countries, audit of shipping companies to reveal compliance of applied fleet management system with navigation safety measures, inspection of technical condition of vessels and the fleet as a whole, development of programmes to improve efficiency of fleet operation both in the commercial activity, safe navigation and environment protection.
The geography covered: the Black, Mediterranean, Baltic and Caspian Seas.
Through our activity we had the honour to make our modest contribution to rendering assistance to the Republic of Azerbaijan (legal aid in a number of litigations on marine law along with assisting in elaboration of the Trading Navigation Code).
We provided serious assistance to the Government of Turkmenistan and the Turkmen Shipping Company (release of Turkmenistan vessels out of the arrest in Turkey and Italy, fleet operation management, optimization of costs and return of vessels to the Caspian Sea). We assisted the Russian government in organization and certification of the navigation security system and implementation of the quality system in the Makhachkala Sea Trade Port.
The Caspian Sea Shipping Company holds a special niche in this list (freight, commercial, methodical, legal and technical assistance, optimization of navigation safety management system, arrangement of seminars, assistance in practical training of captains-instructors; search and arrangement of extension and legal groundwork of interest-free 10 million USD loan on construction and purchasing of ‘Shah Ismail Khatai' tanker, legal assistance to KASPAR in a number of court litigations in Great Britain, South Africa, etc).
CE: Do you continue cooperation with the Caspian Sea Shipping Company?
Tahir Aliyev: Unfortunately, at the moment we do not have any direct partnership with the Caspian Sea Shipping Company mainly on the initiative of the latter.
I guess the Caspian Shipping Company ought to change the methods of business and approaches to it in line with the international norms and up-to-date commercial practice. Possessing its history and experience, till recently the Company had no intentions to build up its business pursuant to the demands of the time. We are pleased with the fact that the management committee of KASPAR understands now the Company cannot manage its processes independently as irreversible consequences of inflexible freight, technical and technological strategy, or to be exact its absence, are obvious. Therefore, in October 2006 the Caspian Sea Shipping Company concluded a contract with newly established Meridian Shipping & Management LLC on full commercial operation of the fleet.
CE: What is the current situation in the freight market of the Caspian Sea and the trends observed here?
Tahir Aliyev: I would say with regret that Azerbaijan has been losing its leadership in almost all fields of the freight market. The reason for Azerbaijan's fleet having lost its position is lack of clear strategy on commercial and technical management. Frequent failures to commit obligations under contracts and aggravating technical condition of the fleet as well as vessels arrests in ports of Iran due to their technical noncompliance resulted in cargo owners desperately seeking for an alternative to Azerbaijani fleet and, finally, Russian fleet today is consistently strengthening in the Caspian Sea. Too, ever growing number of vessels under Russian flag causes and could cause in the future the reduction of transit and turnover of oil and oil products in Azerbaijan itself as Russian ship-owners are reluctant to run their vessels to Azerbaijan, and for this reason cargo owners using Russian fleet have no other way but to raise cargo turnover and transit to Iran and Russia bypassing Azerbaijan.
Such a situation calls for urgent measures package pertaining commercial and technical management of the fleet. Assignment of commercial fleet management to Meridian Shipping & Management LLC cannot make any change as the company lacks for experience and qualification. I am sure this company will fall unble to survive in a long run. Moreover, we are unable to help it regardless of repeating requests, just because the lack of experience and knowledge prevents Meridian Shipping & Management LLC from understanding the essence of our advices and consultations. All this causes loss of valuable time, while Russian fleet and Russian chartering agents keep consolidating their positions in the market they gained in the fair competition.
The matter of greatest concern is the lack of technical fleet management as well as the decline of navigation safety is an inevitable outlook and, finally, may lead to the increase of vessels arrests in ports of Iran and cancellation of KASPAR's Safety Management Certificate, following which no vessel will be authorized to make a move. Another frustrating thought is that unless urgent steps are taken Azerbaijan will be deleted from the White List of countries complying with the regulations of the International Maritime Organization (IMO). In such case the country is included in unreliable countries category, the so-called Grey List, which will immediately affect Azerbaijan's international prestige.
CE: What are the projects the Company is working on now? Does the company draw up any designs for the short run?
Tahir Aliyev: We have a plenty of projects. There are two types of projects: commercial and non-commercial projects. We are working on investment projects; however we do not draw, but just purchase ready projects in various countries, not necessarily related to maritime industry only.
Non-commercial projects are linked solely to Azerbaijan. As usual, we are always ready to give a good advice and share our experience in maritime business. We have a project for resumption of Azerbaijani fleet operations in the Black and Mediterranean Seas. Absence of our fleet in these waters has resulted in our inability to export our oil from port of Ceyhan, which is a financial failure; Azerbaijan could have taken over the whole oil cycle, from production to delivery to any port around the globe. This issue is not so complicated and, certainly, does not require involving Greek or any other subcontracting companies for we have Azerbaijanis eager to assist at the higher professional level and for free.
CE: What is the dynamics of growth of primary performance indicators and how do you see the future of Kron Shipping?
Tahir Aliyev: The Company's monthly turnover is a serious one and is expressed in six-digit figures.
The annual cargo turnover in Caspian Sea alone totals 3 to 4 MT of oil and oil products only by oil tankers. As before, we keep the leadership in Caspian Sea by the number of organized voyages. So, during 2005 through 2006 we organized 766 voyages with oil and oil products.
During the same period of time, we inspected more than 100 vessels of various ship-owners, cancelled authorization of more than 30 tankers operated by the Caspian Sea Shipping Company, of which 15 tankers we later approved for operation upon the completion of appropriate work with the crew and repeat inspections. Over the period of 2005 through 2006 we organized and led jointly with BP Oil International Ltd and BP Shipping Ltd two large-scale workshops for crews and management of the Caspian Sea Shipping Company regarding offshore safety and commercial operation of fleet, with involvement of more than 200 participants.
As it was said above, maritime business is quite a specialized issue and serious responsibility to cargo owners, ship-owners and third parties along with tough competition that involves commercial and national interests of countries and the process participants gives the grounds to appraise this business as highly risky. Lack of or low professionalism in this industry is inadmissible.
Consequently, we see the Company's future in keeping its positions in the market and further progressing with its business in the Caspian Sea region. Today we feel confident to say that our desires match our capabilities.