The U.S. Election: Evaluating the Ramifications for Maritime

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A proverb common to both Greek and Turkish cultures states that a wolf may change its fur, but does not change its nature (Ο λύκος την τρίχα αλλάζει, το χούι δεν τ`αλλάζει /Kurt tüyünü değiştirir, huyunu değiştirmez).  In English, we might render this “a leopard cannot change its spots.”  If we are to believe the proverb, looking at early statements and platforms of the 2016 presidential candidates can provide valuable insight to the next president’s policies.  The maritime industry is impacted by foreign affairs to a greater degree than many industries worldwide.  What is certain is that the global maritime industry, particularly the many companies operating in Greece and Turkey, will be impacted by the policies of the next president of the United States.  Understanding the “nature” of these candidates through their early policies and statements will allow companies to manage risk and properly make any necessary changes to operations before political change can impact a company’s bottom line.

Sanctions

Iran Sanctions

The majority of candidates take a harder view on Iran sanctions than the Obama Administration, which raises the risk that Iran sanctions will impact the maritime industry in 2017.  This risk could be particularly poignant in the Eastern Mediterranean, where Greek and Turkish companies are in a prime position to capitalize on Iran’s “reopening.”

Hillary Clinton is expected to make containing Iran one of her central foreign policy objectives.  Indeed, she has stated that “Iran is still violating UN Security Council resolutions with its ballistic missile program, which should be met with new sanctions designations and firm resolve.”  In a recent debate, Secretary Clinton stated that the normalization of relations with Iran “would remove one of the biggest pieces of leverage we have to try to influence and change Iranian behavior.”  These statements demonstrate that while Secretary Clinton views the current Iran deal as a starting point, she has postured herself as more of a hardliner on Iran than President Obama.

Donald Trump’s views on Iran have wavered and changed over time.  Although Mr. Trump initially signaled mild support for the Iran deal (suggesting he would “police” it), he has recently changed his approach, claiming now that he seeks to “dismantle” the Iran deal.

Governor John Kasich has taken a nuanced view of the deal.  While he is on the record opposing the deal, he has also signaled that enforcement of the current deal may be preferable to new sanctions.

The other candidates’ views of the Iran deal fall in line with their general political trajectory.  Senator Bernie Sanders supports President Obama’s policy and views diplomacy and engagement as the best means to achieve a nuclear-free Iran.  Senator Ted Cruz has compared the Iran deal to the policy of appeasement in the 1930s and has promised to “rip up” the Iran deal.

Given this political uncertainty, companies should be prepared to “snap back” appropriate sanctions management techniques by early 2017.

Cuba Sanctions

Rapprochement with Cuba has been another key piece of the Obama Administration’s foreign policy, the culmination of which will allow companies worldwide to trade with both Cuba and the U.S. without penalty.  The Democratic Party candidates generally support the continuation of these policies.

The Republican Party candidates generally take a hard line on Cuba.  The Republican Party itself has called for both the “dynastic succession of power within the Castro family” and “the legalization of political parties, an independent media, and free and fair internationally-supervised elections” as prerequisites for the rollback of U.S. sanctions.  However, Donald Trump has indicated mild support for the end of the embargo, while characteristically noting that he would have “made a better deal.”  John Kasich has called the deal a “mistake,” while Senator Cruz (who is of Cuban descent) has publicly admonished the Obama administration for its policies and has closely tacked his party’s Cuba policy.

Other Sanctions

Candidates from both sides of the aisle have ignored other U.S. sanctions programs during the campaign.  As Secretary of State, Hillary Clinton promoted democracy in Myanmar and planned intervention in Libya, which could signal that her administration will support the current sanctions in each country.  But, Senator Sanders opposed Libyan sanctions, indicating that the Libyan market could be further open to Greek and Turkish carriers should Mr. Sanders win.

Geopolitical Issues

The maritime industry is impacted by foreign affairs to a greater degree than many industries worldwide.  Greek and Turkish companies operate in a geopolitical neighborhood, which presents unique challenges and business opportunities that the next President will impact.

Cyprus

Cyprus presents opportunity for both Greek and Turkish maritime companies, both in terms of carriage of goods to and from Cypriot ports as well as the potential development of offshore resources.  Although a major regional issue, Cyprus has received scant attention in either the Obama Administration or during the primary campaign.  Secretary Clinton is the only candidate with a track record on Cyprus; in 2011, she called for a “bi-zonal, bi-communal federation” on the island.  The lack of positions signal that the United States will likely continue to pay little attention to efforts to reunify the island.

KRG

The status of the Kurdistan Regional Government (“KRG”) within Iraq or as a separate entity could impact Greek and Turkish maritime interests.  The example of the M/T United Kalavryta crystallizes this reality.  The M/T United Kalavryta is a Greek managed ship that loaded one million barrels of KRG-origin oil from the port of Ceyhan in Turkey.  The oil aboard the United Kalavryta sat off the coast of Houston, Texas, and was subject to litigation between Iraq and the KRG.

While none of the candidates have directly addressed the status of the KRG, almost all the candidates have expressed support for the KRG’s peshmerga forces.  Hillary Clinton and Donald Trump have even argued arming the peshmerga directly instead of through the central government in Baghdad.  This may signal that the two leading candidates see the KRG as an entity distinct from Iraq.

SCS

The South China Sea’s disputed maritime claims have caused international tension in an area where more than half of the world’s international trade transits.  Escalation of these disagreements escalate may hamper the free movement of goods by sea and impact the bottom line of many maritime companies, particularly those with a global reach like in those Turkey and Greece.  With the exception of Secretary Clinton, none of the candidates have formulated a coherent policy on the South China Sea issue, and it is difficult to predict the stance that the next U.S. administration will take on this issue.

Trade

Jones Act

In the United States, there is a saying that the only things certain in life are death and taxes.  It may be prudent to add the Jones Act to this list.  Although the president has some power to enforce and make changes to the implementation of the Jones Act, the power to modify or repeal the Jones Act lies solely with the U.S. Congress, which is unlikely to exercise this power.

Secretary Clinton has publicly expressed support for the Jones Act and has the endorsement of the Seafarers International Union, which supports the Jones Act.  Additionally, the leading candidates hold policy positions in line with the Jones Act, particularly in terms of supporting American jobs.

Senator Ted Cruz may be an exception as his free-market oriented policies may conflict with the legislative intent of the Jones Act.  Two think tanks that are ideologically similar to Senator Cruz, the Heritage Foundation and the Cato Institute, have called for the repeal of the Jones Act.  However, even if Senator Cruz were to ascend to the presidency, it remains impossible to conceive that Congress would repeal the Jones Act.  Greek and Turkish companies are thus not likely to see any change in the ways they can serve the U.S. market.

Support for Free Trade Agreements

Free trade has the potential to increase the movement of goods and services worldwide, which could mean an increase in shipping demand.  However, free trade has been a difficult sell in this election cycle.  Most of the leading candidates have opposed free trade agreements such as the TPP and TTIP, and even disparaged longstanding agreements like NAFTA.  Even Secretary Clinton, who was involved in the negotiations of free trade agreements, has adopted a more negative tone on free trade.  John Kasich is the only candidate who has consistently supported free trade, although he has made protecting American jobs a priority.

These positions do not bode well for an increase of trade under the next administration.  More concerning for the global maritime industry, it may signal a future decrease in demand in one of the world’s largest consumers of imported goods.

Conclusion

The past decade has been fraught with peril for the maritime industry, both in terms of business cycles and government oversight.  As another proverb reminds us, using language common to both sides of the Aegean, “dert (ντέρτι) gitmez, değişir” (problems do not leave, they change).  Taking prophylactic actions based on the “nature” and positions of the candidates can ensure that any “problems” created by the next administration remain only surmountable challenges.

Mr. Roulakis would like to thank Blank Rome Associate Kierstan Carlson and Erik Lowe for their assistance with this article.

“The U.S. Election: Evaluating the Ramifications for Maritime,” by Stefanos N. Roulakis was published in the May 2016 edition of Maritime Reporter. Reprinted with permission.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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