Government dramatically reduces financial cost of Russian sanctions to island
Expected cuts to Bermuda’s aviation industry revenue triggered by sanctions against Russia have been dramatically reduced by the Government.
But Lawrence Scott, the Transport Minister, appeared yesterday to be unable to say exactly why this had occurred.
Mr Lawrence told the House of Assembly last Friday that the Bermuda Civil Aviation Authority (BCAA) could take a hit of $25 million over the next 12 months resulting from UK measures put in place to punish Moscow for its illegal invasion of Ukraine.
However, Mr Scott told a press conference today, that just days later the figure could be some $4 million.
Pressed on the original $25 million figure, the Minister said: “That is a projected number, it is a very fluid situation, so that is subject to change.
“With the current sanctions that have come out, that are being imposed right now, we are actually looking at projecting more of a $4 million reduction in revenue for the year. But that is as things are stated right now.
“So, it’s a very fluid situation and it is subject to change.
“On Friday … when we explain something as being fluid – it’s like water, it moves and changes momentarily.”
Asked to explain why the projected losses had changes so massively in the space of six days when the sanctions regime had been ratcheted-up further against Moscow, the Minister said: “The $25 million was in the worse case scenario if all 85 per cent of our total air registry was grounded, and that is not what is happening.
“That was the projection prior to the round of sanctions coming out. And we prepared for the worst possible case and we were making sure that the country was aware of, at that time, what the largest liability to the Government could possibly be.”
On Friday, Mr Scott told MPs: “As we speak right now, there are no financial impacts on the BCAA’s financial statement. If these sanctions extend for an additional three months it is projected that there could be approximately a $5 million impact.
“If these sanctions go on for 12 months it is projected that is an approximate $25 million impact.”
Asked today how sanctions would affect revenues from the shipping registry, the Minister said: “There are no impacts to the shipping registry as it stands right now. There are no projected losses.
“I don’t believe that there are a lot of Russian ships registered here, no.”
With one of the most famous Russian oligarchs, Roman Abramovich, registering his super yacht, Eclipse, in Bermuda, Mr Scott was asked if there was a chance of it being seized under sanctions.
The Minister said: “No, because there are no Russian individual ownership on our shipping registry.”
Abramovich, who is one of Russia’s richest men, and who is selling Chelsea FC in the wake of the invasion, registered his luxury 530ft superyacht on the island.
One of the world’s largest mega yachts, it spent time in Hamilton in 2013 and 2014.
Also said to be registered in Bermuda is Super Yacht A, owned by Andriy Melichenko, who is reported to dominate the coal industry in Russia. The eight-deck, 465ft yacht was said to have cost $425 million to build.
The UK government has warned that Russian vessels will be banned from British ports.
The Transport Department budget has increased from $59 million in the last financial year to $72 million in the coming one.
However, Mr Scott said $11 million of the increase in funding would go on Skyport minimum revenue guarantee payments, leaving an actual rise of $2 million.
The Minister would not be drawn on whether he believed David Burt, the Premier, could be stretching himself too thinly by also maintaining the role of finance minister after the shock resignation of Curtis Dickinson from the past just days before the Budget.
Mr Scott would not state if he, or the Cabinet, had been informed if the Premier would remain in both key roles.
Despite oil prices soaring to a level not seen for a decade, Mr Scott did not think the massive rise in fuel costs for airlines would hit the tourism trade.
He said: “I don’t believe that that specific item will be of any significant impact to our transportation industry.”
Mr Scott also revealed that funds will be made available for a ferry route from Dockyard to St George’s.
However, he said the “Ministry will implement further service reductions based on demand in the area of the Pink Route ferry”.
Mr Scott said: “The route has experienced low ridership for several years.
“To support the movement of cruise passengers between Dockyard and St George, the Ministry has budgeted for the Orange Route ferry for 2022-23. The Orange Route provides crucial connectivity between cruise ship passengers ‘where it all began’ in St George.“
Asked about the impact of sanctions against Russia on Bermuda, Rena Lalgie, the Governor told The Royal Gazette: “The UK remains in lockstep with international partners in condemning the Russian government’s egregious violation of international law and the UN Charter.
“The UK, along with allies like the USA, Canada and EU, has already introduced most severe package of sanctions ever imposed on any major economy in the wake of Russia’s barbaric invasion of Ukraine.
“The UK will continue to work with Bermuda and the other Overseas Territories to support them in implementing sanction packages that are in place. ”
“The Overseas Territories play a pivotal role in global finance and shipping, and every democracy needs to play its part in this crisis.”