European Commissioner for Transport Vălean: No More ‘Business As Usual’

Adina Vălean, European Commissioner for Transport, talks about the effectiveness of EU sanctions against Russia and their impact on the shipping industry, the need for shipowners to prepare to meet the targets of the upcoming FuelEU Maritime regulation, and explains what the European Commission is doing to make shipping an attractive career option for young people across the EU.

EU sanctions against Russia and its oil exports have affected almost a fifth of Cyprus’s fleet. Are you looking to provide support measures to the industry here and elsewhere?

The Commission has made clear its willingness to consider any specific requests from EU Member States, including Cyprus, on support for shipping. Indeed, earlier this year, we responded positively to a request from the Cypriot authorities on potential tonnage tax reductions linked to the impact of the sanctions on individual Member States. It is now for Cyprus to demonstrate this impact. The sanctions we have imposed are a trade restriction, which impedes ‘business as usual,’ but we cannot forget that Russia’s war on Ukraine is completely unjustifiable – Europe cannot continue business as usual. The biggest concerns have been raised on the shift of oil-carrying capacity to competing flags. According to our data, around 10% of the EU fleet of oil tankers was flagged out to non-EU flags last year. Of these, only 40% had been trading with Russia. This suggests that only around 5% of the total EU oil tanker fleet has been affected by the sanctions.

In 2022-23, cheap crude oil exports from Russia to India reached a record high. In turn, India’s diesel exports to Europe went up – at higher prices. This suggests that Russian oil is finding its way into the EU via the backdoor, so isn’t there some truth in the view that the present sanctions are not fit for purpose?

The EU sanctions on Russian oil prohibit the direct import of crude oil and refined oil products from Russia and the import of such products when they originate from Russia. Refined oil products produced in a third country – using Russian crude oil and then exported from that country or another third country – would not be subject to the sanctions. Russian oil blended with oil of another origin is, however, subject to the prohibition. We are working closely with the relevant national authorities, including port authorities, to address circumvention. For example, the Commission created a new position for an International Special Envoy at the end of 2022, whose role involves ensuring continuous, high-level discussions with third countries. For the time being, EU sanctions have proven very effective: They have reduced Russian revenues but kept Russian oil flowing to world markets at a discounted price. This, in turn, has helped contain the oil price for EU consumers. G7+ price cap instruments have helped to force discounted prices on Russia. The International Energy Agency (IEA) reported an average Russian crude oil export price of around $52.5/barrel in February 2023, which is $30/barrel lower than global prices, which currently stand at around $80/barrel.

Last year, you were quoted as stating that the sanctions against Russia “could also present opportunities for the Cyprus maritime sector”. What did you have in mind and has that proven to be the case?

Sadly, the world changed in February 2022 with Russia’s unjustified war in Ukraine. In this new world, shipping has become even more important in a strategic sense – with new routes needed for sea-based imports of clean energy and raw materials from our partners around the world. As a key shipping nation, Cyprus plays an essential role in safeguarding our strategic autonomy as a continent. And let us not forget that, while most trade with Russia is now banned, there are still legitimate shipments that are carried, to a very large extent, by European vessels. I also strongly encourage operators to look at our Solidarity Lanes, which seek to help export Ukrainian grains via the Romanian port of Constanta. There are important opportunities there, with millions of tons of cereals needing to be transported.

In March, legislators in Brussels reached a provisional agreement on the FuelEU Maritime initiative, which is a key part of the EU’s “Fit for 55” package. What can shipowners expect under the new regulation?

The FuelEU Maritime Regulation will support the energy transition in maritime transport by incentivising the use of renewable, sustainable and low-carbon fuels. The greenhouse-gas-emission intensity of the energy used onboard will need to decrease gradually between 2025 and 2050. Container and passenger ships at berth are also required to connect to an onshore power supply from 2030 to reduce air pollution in port areas. While the rules are technology-neutral, leaving operators the choice of fuel depending on their fleet and trade type, specific incentives are included for the use of renewable fuels of non-biological origin (RFNBOs). This will support cost competitiveness and the uptake of this family of fuels. Incentives include a ‘multiplier of two’ – energy from RFNBOs counts twice towards the targets. I encourage shipowners to start preparing their strategies to meet these targets, and to reach out to fuel suppliers and ports to ensure that they have access to fuel and an onshore energy supply that fits their fleet and decarbonisation strategy. I would also advise the sector to familiarise itself with compliance formalities. Member State authorities will have a central role in FuelEU enforcement, working together with independent verifiers. Shipping companies will have to monitor and report all energy consumption at sea and in EU ports. To minimise the administrative burden, reporting will be streamlined with the obligations under the MRV Regulation and the ETS Maritime. To facilitate compliance, a shipowner may benefit from flexibility mechanisms (banking, borrowing or pooling).

What opportunities will be created for the industry by the push for alternative fuels?

The push for alternative fuels creates a market for the development and deployment of new technologies and energy solutions in the EU and beyond. FuelEU Maritime has a long-term outlook, promoting a minimum, gradually increasing level of demand for sustainable hydrogen-based fuels. The RFNBO sub-target is designed to create a signal for the supply of renewable hydrogen-based fuels, which are scalable and have the highest decarbonisation potential. This clear and predictable regulatory framework provides the industry with certainty, facilitating planning and investment by all stakeholders. The pooling mechanism, allowing over-performance by one ship to compensate for under-performance by others, rewards over-compliance and incentivises gradual investment in more advanced technologies. I see opportunities along the entire value chain, and we are helping others to see them too. For example, the Renewable and Low-Carbon Fuels Value Chain Industrial Alliance is tasked with boosting the production and supply of renewable and low-carbon fuels in the aviation and waterborne sectors and is open to all stakeholder groups wishing to exchange information and coordinate. Meanwhile, the Zero-Emission Waterborne Transport Partnership is supporting the development and deployment of economically viable technological solutions in the sector.

Labour shortages in the maritime sector are a major concern, as they directly influence cargo flows and the efficiency of the supply chain. What policy levers can the Commission use to make the industry a more attractive option for young people?

Indeed, labour shortages are a major concern in shipping. The shipping industry relies heavily on a skilled workforce trained to operate vessels, maintain equipment and manage supply chains. A shortage of skilled workers may have a major impact on cargo flows, and therefore the efficiency of supply chains. The shortages are due to a combination of factors, including an ageing workforce, a lack of interest in maritime careers among young people, and competition from other industries. During my visit to Cyprus last year, I was pleased to see the wide interest of the younger generation in a career in shipping, testimony to Cyprus’ maritime tradition and the broad opportunities this sector has to offer. For example, increasing automation and digitalisation within the maritime sector could make it more appealing to young people. In addition, the transport sector must offer fair working conditions, reskilling opportunities and attractive jobs. On our side, we have launched initiatives to increase the attractiveness of the transport sector for its workers, notably the ‘Women in Transport – Platform for Change’ and the network of Diversity Ambassadors in Transport. We are also disseminating educational toolkits to fight gender stereotypes from an early age through education, and measures to support work-life balance, such as good staff scheduling and rostering practices. Our expert group on horizontal social issues in transport, set up in 2021, is a forum to strengthen dialogue between and with Member States, for instance on how to mitigate the impact of automation and digitalisation on the transport workforce, and how to address staff shortages. The European sectoral social partners from the transport sector are invited to participate as observers. Collaboration with social partners like shipowner associations, seafarer’s unions and UN agencies became stronger during the COVID-19 pandemic when all worked together on guidelines for the safe operation of ships, including protocols for crew changes. We are now taking advantage of this closer relationship to develop better working conditions for those working at sea. One key element is the coherent implementation and effective enforcement of international legislative instruments. We are also encouraging Member State administrations to improve social protection for seafarers by improving access to healthcare, pensions, and social security benefits.

This interview first appeared in the May edition of GOLD magazine. Click here to view it.