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By John Helmer in Moscow

Visits by politicians to banana boats are almost unprecedented outside the tropical climes; no Russian prime minister has ever boarded one before. Almost as rare is it for Prime Minister Vladimir Putin to favour a foreign-owned shipping enterprise when it is competing against a Russian enterprise owned, not only by a fellow St. Petersburger, but the oligarch in his sector.

So who gained, and why, from Putin’s presence aboard the Maersk Niamey in St. Petersburg port on Monday?

The answer to that will not come officially from the Danes, whose prime minister, Lars Løkke Rasmussen, was raced by Putin eight floors up a stairway to the bridge of the vessel. There, Rasmussen (centre figure) tooted a horn to start unloading 1,200 refrigerated containers of bananas, which the boat had loaded at Guayaquil, a Pacific Ocean port of Ecuador. Just under 60,000 cooled bananas were put ashore.

Putin quizzed the others on the bridge whether they knew how many days the voyage took from Guayaquil to St. Petersburg; he then corrected them when they fell short of the correct answer – 21 days. He also announced he was delivering cheaper bananas to the Russian masses because they were shipped direct. “For consumers,” he said, “it means, I hope, a containment of prices for foods, including tropical fruit.”

According to the Maersk publicity release, Putin was there to inaugurate “a new direct service between Ecuador and Russia, called the ECUBEX service.” ECUBEX stands for Ecuador Banana Express. This service, said Maersk, “will be the first direct liner route between the two countries and will stand out as a unique solution given the short transport time, bringing high quality Ecuadorian products to the Russian market. As trade links are enhanced and expanded, the route will bring benefits to both Russian and Ecuadorian exporters and importers.”

A spokesman for the Danish Shipowners Association waxed even more eloquently on the banana express. According to Jan Fritz Hansen, the banana boat inauguration is a symbol of Russia’s improving relationship with Denmark, and of improving trade flow. “We see Russia as an extremely important trade partner, particularly in the Baltics,” Hansen told Fairplay.

The Maersk press release says the banana express “consists of 6 newly built Ice-Classed container vessels with maximum reefer capacity (600 plugs) and total nominal capacity of 2500 TEU. The weekly service calls at: Guayaquil (Ecuador), Balboa (Panama), Rotterdam (Netherlands), St. Petersburg PLP (Russia), St. Petersburg FCT (Russia), Bremerhaven (Germany), Manzanillo (Panama), Balboa (Panama), Guayaquil (Ecuador).”

A Danish Embassy spokesman said he didn’t know why Putin had dedicated part of his day to the Maersk Niamey unloading. Asked to clarify the size of Danish companies working in Russia, he added: “We do not know whether Maersk is the biggest Danish company operating in Russia.” Copenhagen sources claim Carlsberg the brewer, which is half the size of Maersk in global market capitalization, does bigger business in Russia in rouble revenues, but both depend heavily on the Russian market for their profitability, as do several other Danish concerns. The bilateral trade figures indicate that in 2008 combined turnover was $3.7 billion, equally divided between Russian sales to Denmark, and Danish sales to Russia. Last year, the total dropped 20%, with Danish sales dropping most, and Russian exports staying stable.

Prime Minister Rasmussen claimed the banana boat ceremony “is a testimony to the improvement of bilateral ties.”

The Russian shipping industry and fruit trade have made clear that this is not the first direct cargo service between Ecuador and Russia; nor, they say, is it likely to be cheaper than those which have been operating for years, and continue to operate. The Russian banana merchants say they see no impact of Maersk’s deliveries on the price of bananas, which are currently falling in price on the Russian market, because supplies exceed demand. Maersk acknowledged that it is taking on board all cargoes, not only bananas. But it refuses to say how much of the banana express will be dropped off at the European food hub at Rotterdam, and how many bananas will sail on to St. Petersburg.

Alexei Bezborodov, a leading maritime industry analyst in Moscow, and author of the annual bible on Russian container business, told Fairplay: “this is no news at all. Ecuador has supplied bananas to Russia for years, and it has been three months now since bananas were first transported to Russia in [refrigerated] containers. Before that bananas were simply transported in [refrigerated] bulk. So there is nothing to report here.”

Among the leading banana distributors in Russia, Intertorg Trade House said: “there are just enough bananas on the market right now. I don’t think the Maersk line will help reduce the prices. The political goal of developing trade relations with Denmark is certainly more important than bananas.” Optifood, another big banana in the domestic market, refused to talk, along with Globus Group. Akhmed Fruit Company of St. Petersburg acknowledged: “We experience no shortage of banana supplies; on the contrary, supplies overshadow consumption. We don’t believe the new banana line from Ecuador can lower the prices — this is barely possible. In general, the April to June period traditionally brings prices down slightly, but there is no influence on this trend from this or that container line. It is possible that the new line is aimed at promotion of Russian-Danish relations.”

Joint Fruit Company (JFC), the St. Petersburg fruit importer owned by Vladimir Kekhman, grows bananas on its own plantations in Ecuador, ships them to St. Petersburg on a fleet of its own vessels, and stores them in its own warehouses. It also sells far more bananas to Russian consumers than anyone else; about 36% of the market. Its market share is growing larger, because of the financial collapse of two rivals, Sorus and Sunway. Although they applied for bankruptcy in November 2008 and May 2009, there is industry-wide doubt over what caused their financial collapse, and where the funds have gone. Before they crashed, Sorus has a 10% share of the fruit and vegetable import market; Sunway, about 15%.

JFC, which is registered in the Caribbean, and not for the banana-growing weather, does not release regular annual financial reports. The last one, for 2007, indicated turnover of $500 million. Published estimates suggest that in the peak year of 2008, JFC’s revenues were $700 million. Its debts were $300 million. Owning and operating the complete logistic chain from banana palm to supermarket shelf ate away at JFC’s margins, and lifted its demand for loans. So did Kekhman, the banana oligarch, who invested his JFC proceeds in speculative real estate, as well as in the Mariinsky opera and ballet theatre of St. Petersburg, which he also manages.

The 2009 collapse of Russian consumer incomes and buying power caused a drop in the volume of imports of fruit of about 6%. Not half as badly as other imports, but a serious blow to companies living off the 15% per annum growth rate which the imported fruit market had been demonstrating. Bananas, however, benefited, because they were cheap. In the first half of last year, banana consumption rose by 24% on the year before, making JFC even more powerful commercially than it had been before: http://johnhelmer.net/?p=1567 The pickup in banana consumption lifted to 80% the proportion that banana sales makes to JFC’s turnover; before the crash, it had been 60%. But hasn’t improved the ability of JFC and other local fruit companies to refinance their debts.

If Kekhman, who attended Putin’s banana ceremony last week, had a wish for the prime minister, it might have been for higher-priced bananas, or lower-cost loans from state banks. But he and JFC hardly want to see Maersk’s deliveries help lower the price even further, and aid much smaller importers and distributors, including the fly-by-nighters which cluster around St. Petersburg port, to take market share away from JFC. But JFC isn’t in the mood to answer questions.

A report in the fruit industry press suggested recently that Russian consumption for bananas cannot grow beyond about 1 million boxes (20 kgs) per week; but for the moment, it is importing 1.7 million boxes. There is wishful thinking on the part of small traders and importers, according to trade gossip. The sale price of the fruit is down to the level of 2008. But the costs, including the rise of the dollar against the rouble, have been rising. Industry reports claim banana trading was a loss-maker at Christmas time. The more bananas Maersk, Putin and Rasmussen offload, the more money the trade appears to be losing, at least that appears to be the position on the spot market, where even with declining transportation rates, the profit margin on a box of bananas can be as low as one dollar. Was it Putin’s intention to encourage ruinous banana speculation, undercut JFC’s margins, all to enrich the Danes?

Not so easy, Andrei Semenov, a JFC marketing executive, explained in a recent interview for the Russian Transport Weekly. Once the banana is off the boat, it requires specialized storage and distribution facilities, which the smaller traders don’t have, and which Maersk can’t offer them either. Bananas, said Semenov, need a special temperature, and gassing chambers for ripening. JFC has the terminals to do this; others do not. This provides an advantage for the established merchants, and a costly barrier to entry into the market for rivals.

Dixy, a major supermarket retailer, tells Fairplay there hasn’t been any shortage of bananas recently, and politics, not price, was “probably” the inspiration for Putin’s display on board the Maersk Niamey. But what politics was this?

Sources in Denmark say they believe that Putin’s banana performance is part of an elaborate piece of theatre intended to recruit Rasmussen’s government and the major Danish corporations behind at least one big Russian commercial objective. That is Gazprom’s Nord Stream – the pipeline running on the Baltic seabed to deliver gas to western Europe. The Danish government gave construction approval for the pipeline last October, and the Nord Stream announcement does not refer to further permission requirements: http://www.nord-stream.com/en/press0/press-releases/press-release/browse/1/article/denmark-grants-construction-permit-to-nord-stream-pipeline-project.html?tx_ttnews%5BbackPid%5D=24&cHash=4ed153878d The other Baltic states have also approved the project. But according to Copenhagen sources, there remains strong public environmentalist opposition in Denmark. Their perception is that Putin is looking to exchange favours with Maersk, and other Danish companies selling goods and services to Russia.

There have been other problems between Copenhagen and Moscow in the shipping sector, which have rankled the Danes. One concerns the attempt by the Russian Prosecutor-general to seek the extradition of executives of Samara-based Volgotanker, once one of the largest tanker fleet operators in the world. Its destruction on trumped-up charges has transformed the transportation of crude oil on Russia’s domestic waterways.

In August 2006, the Russian Prosecutor-General demanded the Danish government extradite Ilya Katsnelson on charges of tax fraud, money-laundering, embezzlement, and “abuse of authority”. Katsnelson had been based in Copenhagen and Moscow for the operation of Volgotanker’s ocean-going and riverine fleet of oil tankers. Other senior executives and the controlling shareholders of Volgotanker, who had fled to London, were similarly charged. Volgotanker managers left behind in Russia were tried, and sent to jail. The UK Government has given asylum to its Volgotanker refugees, and rejected the Russian extradition requests as groundless.

In Denmark, Katsnelson, whose family emigrated from Russia to the US in the 1970s, and who holds US citizenship, was investigated by the Danish police and Justice Ministry for almost three years. Their conclusions were that the Russian authorities had failed to provide sufficient evidence to substantiate any of the charges, or to warrant extradition under Danish law. After supplying Moscow with volumes of information gathered on Katsnelson and his Danish maritime businesses, the Danish Ministry of Justice told its counterpart in Moscow that extradition was refused in July of 2009. The Rusisan prosecutors have not relented, though, and continue to pursue Katsnelson’s arrest through an Interpol warrant.

The Danish government has so far carefully avoided taking a stand on whether the Volgotanker prosecutions were part of an organized campaign, using political and administrative methods, to facilitate the transfer of a lucrative asset in the oil and maritime business.

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