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Affinity Policy Comment 26 february 2024

Growing Uncertainty

Two years since Russian tanks rolled into Ukraine, Europe faces growing geopolitical uncertainty. In February, Ukraine’s offensive to recapture territories was completely blunted, and Russia made its biggest gain in nine months on the battlefield as they took control over the town of Avdiivka in Donetsk, and a new defence line has been set up in the west of the city. The big question is how strong is that defence line and whether Ukraine can stop Russia’s further westbound advance.

President Joe Biden sought to show his determination to stand up to Russia in announcing fresh sanctions on Friday, but his determination was tempered by concerns that the toughest measures left in the US arsenal risk roiling the global economy.

A 200-page list of targets based in Russia, the UAE, China and other nations was the biggest single-day package of financial punishment since Russia invaded Ukraine in 2022. Just as notable, though, were companies and sectors missing from the expansive list: the metals sector, more energy-related punishments, and secondary sanctions on banks. This restraint illustrates that, despite President Biden's emphasis on sanctions, his administration remains hesitant to target revenue channels that experts believe would significantly weaken Russia's economy. This caution stems from concerns about triggering widespread disturbances that could negatively impact the US economy.

Possible targets for a more aggressive approach could include the foreign banks that help Russia procure the technology and materials it needs to continue the war, as well as the trade in enriched uranium and metals such as aluminium and nickel. The US could also potentially seize and distribute frozen Russian sovereign assets. All of those measures carry significant risks.

Indeed, the list published on Friday was filled with names of people and entities that have already been sanctioned or have limited links to the US financial system, reducing their impact. There was the warden of the prison where Russian dissident Alexey Navalny died this month and the deputy director of the Federal Penitentiary Service.

In the meantime, what’s still missing is the action Ukraine really wants: approval of USD 60 Bn in fresh armaments and munitions. Biden’s request for that money is tied up in the House of Representatives.

The stalemate in the US Congress to pass the bill for Ukraine aid is adding to Ukraine’s challenges and partly explains Ukraine’s forced withdrawal from Avdiivka. While the US Senate has passed the bill, the republican-majority House has not even allowed a vote on it. At a global security conference in Munich on 17 February, Ukraine President Zelenskiy urged allies to plug the shortages and said that US support remains essential. Ukraine’s army is running short of ammunition, and they have had to resort to rationing. Air support is another area of concern as training pilots is taking time. However, Zelenskyi’s decision to replace a top military commander is a risky bet for such a delicate time.

Republicans’ leading presidential nominee Donald Trump fuelled outrage as he said that the US under his watch would not defend those European allies that fail to meet NATO’s 2 per cent defence expenditure target. In 2023, only 11 countries spent at least 2 per cent of their GDP on defence, although France came close at 1.9 per cent. Finland is the only Nordic country to meet the threshold, and in 2023, both Germany and Italy spent less than 1.6 per cent of their GDP on defence.

In response, European leaders are calling for greater unity and military cooperation across the continent. The EU Commission has said they will propose a new defence industrial strategy in the coming weeks. The plan is said to include elements similar to Commission’s approach in buying Covid-19 vaccines, including joint procurement and offtake contracts. Von Der Leyen, who is seeking a second term, has also said she is planning to install a new post for a Commissioner for Defence if she is re-elected.

The main scenario ahead seems to be a frozen conflict that could last for years. Russia with its increasingly demotivated army might not be able to make significant advances, as long as Western military support for Ukraine remains. As for Ukraine, the likelihood of pushing Russia back behind the 2014 defence lines remains very slim.

However, downside risks to this scenario remain substantial. The main one is related to war fatigue among Ukraine’s Western allies, leading to a significant reduction in military support. The US 2024 presidential election poses a significant event risk if Trump is re-elected. On the other hand, upside risks are related to the scope and success of Ukraine’s future counter-offense.

On other developments, tensions continue to build up in Latin America between Venezuela and neighbouring Guyana. Venezuelan President Nicolas Maduro is ramping up territorial claims on the Essequibo region, which makes up about two thirds of Guyana’s territory, and where Exxon is planning a new site. Satellite images reveal a build-up of Venezuelan military forces near the border, yet it remains uncertain whether this is merely posturing by Maduro in anticipation of the presidential election scheduled for later this year.


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    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

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    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
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    +51 99 115 2393

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    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    Contact: Rahul Khanna
    [email protected]

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    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

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    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Affinity Valuations Limited Terms of Business

    Contact: Stuart Morrison
    [email protected]
    +44 (0)20 3142 0144

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    +56 99 887 3036
    Contact: Rahul Khanna
    [email protected]

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Affinity Valuations Limited Terms of Business

    Contact: Stuart Morrison
    [email protected]
    +44 (0)20 3142 0144

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