SHIPPING: The New Argonauts

(See Cover)

Lazy as a cloud, the black-hulled, three-masted schooner Creole loafed along the coast of Spain last week. To gay music on the intercom, the 190-ft. Creole, world’s biggest privately owned sailing vessel, stole past silver-sanded coves and pastel villages. On sunny afternoons, while the schooner lay at anchor, passengers dipped in the warm water or sipped in cafes ashore. After dark, white-gloved stewards moved unobtrusively among the guests in a softly lighted dining room hung with French impressionist paintings. Pushed by gentle winds, the Creole headed at week’s end for the island of Mallorca. the golden isle of the Hesperides, to which Hercules, of Greek legend, once sailed in search of the Golden Apples.

Lord of the 697-ton Creole, and the hero of a new Greek legend, is Stavros Spyros Niarchos, 47, world’s biggest independent shipowner. The legend of Niarchos, fondly referred to in the world’s press as the “Golden Greek,” is a blurred montage of shipboard launching parties, at which he bestows diamond bracelets and gold Faberge cigarette boxes on the beautiful and highborn women (e.g., the Duchess of Kent) who christen his ships, repartee in the royal enclosure at Ascot, champagne flowing like home brut in the nightclubs of London and Paris. Unlike most legends, it is woven from whole fact.

When the world’s most prized collection of antique French silver went on sale.

Niarchos put up $250,000 to keep it intact for the Louvre. On his visits to Greece, Niarchos hands out gold sovereigns on the streets of Athens like a rich man’s John D. Rockefeller. Some of his more offhand gestures have included chartering a steamship for a royalty-only romp in 1954 chaperoned by Greece’s Queen Frederika. Niarchos obligingly provided another steamer last summer so that Elsa Maxwell could take an all-star supporting cast (Olivia de Havilland, Aly Khan, the Duke and Duchess of Argyll) on a Mediterranean junket while Niarchos cruised the other end of the sea aboard the Creole; he was “too busy” to goalong.

Million-Dollar Answers. The Creole is more than a princely pleasure barge; it is also the flagship from which Niarchos directs the far-flung fleet of 48 merchantmen that carry his initial, a sprawling N, on their smokestacks. Each morning last week, while his guests still lay abed, Niarchos settled himself at a desk in his fawn-carpeted stateroom. With an unlighted Papastratos No. 1 cigarette between his lips, he pored over an 18-in.

stack of overnight cables, dictated answers involving millions of dollars. One day last week, in a radio message to his London office. Niarchos approved final specifications for a new 32,650-ton tanker (cost: more than $10 million).

Even without this addition, there is no doubt that Niarchos has more ships afloat and abuilding than any private shipowner in the world. When the 28 new ships under construction are completed, Niarchos’ fleet will total 1,976,779 deadweight tons,* five times the size of the French navy.

“The Greeks.” The master of this seagoing empire is a hawk-nosed, trim (5 ft. 7½ in., 155 Ibs.) man with glossy, grey-flecked black hair and glittering brown eyes that betray an acquisitive, competitive, imaginative mind. The secret of his success is hard work, nerve, intelligence and, say his friends, over and over again, “the ability to see into the future.”

In the early postwar years, Niarchos saw the bright future of international trade and plunged into shipping with every drachma he could scrape together while most shipowners were battening hatches to ride out an expected slump. In ten years. Niarchos has not only built his fleet—and a fortune estimated as high as $350 million—but has helped revolutionize the design, financing and operation of tankers, launching a new race of giant ships that is fast changing the economics of merchant marines the world over.

He is the leader of a new band of Argonauts who have given the shipping world a new term: “the Greeks,” meaning the independent shipowners of whatever nationality who have sailed on the crest of the postwar shipping boom. Customarily included among “the Greeks” is Midwestern-born Daniel K. Ludwig, 58, whose fleet (estimated at 1.5 million tons) is second only to Niarchos’. Behind Ludwig presses Niarchos’ brother-in-law, Aristotle Socrates Onassis. 49, a flamboyant Smyrnan who, with Niarchos. bought the Monte Carlo Casino in 1954, owns some 1.3 million tons of shipping, the world’s third biggest independent fleet. Close behind him is Stavros Livanos, spry, 65-year-old father-in-law of Niarchos and Onassis, with some 1.2 million tons. In all, “the Greeks” have more than 9 million tons plying the world’s sea lanes.

Oil Is the Key. Thanks largely to the independents, world shipyards today are busier than in any peacetime year in history. From Norway to Nagasaki, slipways are jammed with new hulls. Though they are busily expanding capacity to handle the boom, some shipyards cannot promise delivery before 1962. Anticipating a continued upsurge in world trade (which has already soared 50% since 1948). shipowners are ordering giant new ore carriers, combination ore-petroleum ships, roll-on, roll-off carriers to haul loaded trucks and vans, fast new freighters to slake the world’s impatient thirst for machinery and steel, coal, wheat, and other basic raw materials that must be hauled from the ends of the earth (see color pages). Most of all, shipowners are clamoring for tankers. Though the world’s tanker fleet has doubled since World War II, oil shipments have grown to 45% of all tonnage moved by ship (v. 21% in 1937), and the fleet is still inadequate for the load. The answer: supertankers.

Like all great ships of the past, from the Greek trireme to the Yankee clipper, the supertanker was launched to meet a specific demand at a specific time. Supertankers have not only kept a vast and constant stream of oil flowing from the Middle East and South America to U.S.

and European refineries, but have proved their economy as well: they can haul oil halfway around the world for 3¢ a gallon, less than the prewar cost. Reason: a 50,000-tonner carries few more crewmen than a 16,600 wartime T-2 tanker, gets more speed, thanks to better hull design, for every unit of horsepower.

Bigger & Bigger. In the race to build these new giants. Ludwig’s 30,000-ton Bulkpetrol was first off the ways in 1948.

Niarchos, building ever bigger ships, by 1951 claimed the world’s biggest tanker: the 31,745-ton World Unity. Supertankers kept right on growing; by 1954 the biggest tanker was Niarchos’ 45,509-ton World Glory. Two years ago Onassis took the title with his 46,500-ton Al Malik Saud Al-Awal. Early this year-Nkrchos launched the 47,750-ton Spyros Niarchos (named for his late father), which last month in Rotterdam broke all tanker records by discharging a 41,000-ton cargo (287,000 bbls.) in 17 hours 48 minutes.

The race is far from over. Niarchos who has two 65,000-tonners on order in Germany and is planning a third in the U.S., will launch the sister ship of the Spyros Niarchos next week in England.

This week Ludwig’s 84,730-ton Universe Leader will go down the ways at Kure, Japan, where Ludwig has turned out more than half a million tons of shipping since he leased the former Imperial Navy Yard in 1951. Six feet wider than the Queen Elizabeth, the Universe Leader will be able to haul more than enough gasoline in one trip to fill the tanks of every General Motors car produced in the first six months of 1956.

The New Collateral. To build and operate the supertankers, the Argonauts devised a shrewd technique for raising the cash without putting up much money of their own. Niarchos persuaded the oil companies—which were then unwilling to tie up capital in shipping—to put his unbuilt tankers under long-term charter (up to seven years). Armed with charters that would pay for new tankers in less than half their 20-to 25-year working span, he then made firm contracts with shipyards and went to banks and insurance companies for construction loans, using the charters as collateral. With the loans guaranteed, in effect, by the oil companies, banks readily advanced up to 100%.

Though chartering reduces the risks, Niarchos and the other independents are engaged, as one independent said recently, “in the biggest floating crap game in the world.” They rely on long-term contracts and fixed rate scales for steady income; only by keeping some ships available for short-term charters can they take advantage of the sudden rises in rates that turn the big profits. When world oil consumption spurted a mere 10% in 1948, charter rates rose 250%. On the other hand, a prolonged fall in tanker rates can come close to wrecking an independent.

In this kind of betting on the future, no one has done better than Niarchos. Except for 1954, when six of his ships were laid up for five months, his tankers have hauled all the oil they could load, often at fancy prices. Shuttling between long-and short-term contracts, his fleet last year transported the equivalent (3.5 billion gals.) of New York State’s annual gasoline consumption.

“Flags of Convenience.” Niarchos is able to haul oil cheaper than U.S. producers can in their own tankers and pile up fabulous profits because, like most independents, he whittles operating costs to the bone, runs all but a few of his ships under “flags of convenience.” Registered by mail order in Panama or Liberia, the ships pay only nominal taxes,* e.g., 10¢ a ton yearly, employ nonunion crews and are unlikely ever to be seized for defense reasons. Niarchos, in addition, pays no corporate taxes on most of his profits. These are considerations which no banker can afford to overlook. As an approving London banker said recently: “The great virtue of Niarchos is that he’s a gypsy.”

For these and other reasons, Niarchos is distrusted by oldtime shipowners, sneered at as an “uptown boy,” i.e., a landlubber who doesn’t know his fantail from a fo’c’sle. Though he seldom sets foot aboard a tanker, Niarchos retorts angrily that he is far more concerned with his fleet than his fortune.

Lowest of the Low. Niarchos has a rare faculty for expanding his fleet “when shipyards are hungry.” In 1949, when British yards were hungry ($120 a ton), he ordered ten tankers; when British berths filled up, Niarchos fed the German, Dutch and Swedish yards, later moved on to hungry Japan. He drives a hard bargain. Says Netherlands Dock and Shipbuilding Co.’s Pieter Goedkoop, who has built two tankers for Niarchos: “He dictated the price. It wasn’t unreasonably low. It was the lowest of the low that he could reasonably ask.” But after signing a construction contract, Niarchos believes in letting the shipbuilder do the job without niggling interference. Though the World Glory was the world’s biggest tanker when it was launched in 1954, Niarchos gave Bethlehem Shipbuilding a scant four pages of specifications instead of the usual 4-lb. tome; he sent no inspectors aboard until just before the tanker was launched.

While prewar Greek ships were sorrylooking rustbuckets, Niarchos has turned out some of the handsomest merchantmen afloat. To get top seamen, Niarchos pays his Italian, Greek, German and British crews more than they would earn under their own national flags (but less than one-third of the U.S. scale), equips his new tankers with air conditioning, lavish private quarters for all hands, tiled showers, TV, elevators, recreation rooms.

The New Plutocrat. Footloose and taxfree, Niarchos typifies a new species of plutocrat. He leads a frankly sybaritic life, with no apologies and few hangovers.

With the Creole (which he sailed in last month’s Torquay-Lisbon race) and his “little boat,” the 103-ft. auxiliary schooner Eros, Niarchos has cruised effortlessly into international society. He has become a patron of the arts (he paid $300,000 for El Greco’s Pieta) and the sport of kings (his 18-horse stable includes Nashua’s dam, Segula). A lover of good food and wine, he has been known to explain to dallying guests, as he heads for the dining room: “My cook doesn’t like to be kept waiting.” He likes to dance and gossip,-“gives or attends at least five parties a week in London or Paris. Largely to accommodate his friends, Niarchos maintains a Long Island estate, a duplex apartment in Manhattan, town houses in Paris and Athens, a London penthouse at Claridge’s once occupied by Sir Winston Churchill, a four-story, $575,000 Cap d’Antibes chateau that has sheltered such royal refugees as the Duke of Windsor and Belgium’s ex-King Leopold. Recently, he bought “Blue Horizons,” one of Bermuda’s most elegant abodes.

The Critical 40%. But Niarchos never lets the pleasures of his wealth interfere with his passion for his ships. To handle the day-to-day operations of his empire, Niarchos has recruited some of the world’s top shipping brains. His 120-man London staff, quartered in two Georgian mansions in Mayfair, is headed by Reginald John (“Square Rig”) Dodds, onetime tanker boss for Shell Tankers, Ltd. which is one of Niarchos’ best customers. His Manhattan office is run by Financial Expert Walter Saunders, onetime vice president of Metropolitan Life Insurance Co., which is one of Niarchos’ heaviest backers. Says Niarchos: “My staff makes 60% of the decisions. I make 40%.” But his 40% is in the critical area of policy.

Niarchos spends little time at any of his nine offices from Hamburg to San Pedro, transacts top-level business with bankers and charterers (in fluent French or English) over leisurely luncheons at quietly opulent restaurants such as Manhattan’s Chambord and London’s Mirabelle. Wherever he goes, he is dogged by daily packets containing interoffice memos and notes from his staff. When he wants to discuss a project with an associate, Niarchos summons the man to his side, once kept staffers shuttling to and from Switzerland for three months while he recovered from a skiing accident.

Niarchos’ routine, as a London associate observed, “is that he has no routine.” However, summer usually finds him aboard the Creole, winter on the ski slopes of St. Moritz (where the toughest descent is labeled NIARCHOS RUN). In June, the menage gravitates to London for the social season. Twice in the past four years they have come to the U.S. so that his attractive young wife, Eugenie Niarchos, 26, could bear two native American sons.

First Decision. Niarchos himself came within three months of being born a U.S. citizen. His emigrant parents, Spyros and Eugenia, were running a hotel in Buffalo when they decided to return to Greece in 1909. A putative descendant of the Near-chus (meaning shipmaster) who was naval chief of staff for Alexander the Great, young Stavros grew up among ships in the Piraeus, Athens’ port. He was educated as a lawyer at the University of Athens, went to work after graduation for his uncles’ flour-milling company. In 1935, when trade was slack, and idle ships clogged the Piraeus waterfront, Niarchos persuaded his uncles to cut their freight bills by buying ships of their own to carry grain from Argentina.

The family fleet did so well that Niar chos was encouraged to quit his uncles’ business and borrow enough money to start his own shipping firm in 1939. Soon he was running seven tramp freighters from cubbyholes in brokers’ offices in New York and London. That year Niarchos married Melpomene Capparis, sister of a longtime friend, Ambrose Capparis, who is now an executive in Niarchos’ Manhat tan office. (The marriage ended in divorce in 1947.) With the fall of France in 1940, Niarchos decided that ships would soon be in short supply. By the time the U.S.

entered the war. he had a fleet of 14.

Leasing his ships to the U.S. and British governments, he went off to North Atlan tic convoy duty as a deck officer in the Royal Hellenic navy.

Gunwale-Deep Trouble. At war’s end, with $2,000,000 in insurance from six of his ships that had been sunk, Niarchos once more bet that merchantmen would again be in short supply, despite the thousands of ships built during the war.

When the U.S. Maritime Commission announced that it would accept old hulls in part payment for new ships, Niarchos scurried around offering owners a better price than the Government, wound up with six battered freighters. Says he: “I bought anything that would float.” Niarchos started off by shipping coal to Europe. But he soon scented the postwar oil boom. His reasoning: “No one wants to stoke coal if he can regulate an oil valve instead.” In 1947, Niarchos started selling his freighters and made the first of several deals that were to plunge him up to the gunwales in trouble with the U.S.

Justice Department. He applied to the Maritime Commission for six T-2 tankers.

Though the ships could legally be sold to friendly aliens under the 1946 Merchant Ship Sales Act, the U.S. Navy was insisting for defense reasons that merchantmen remain in American hands.

To qualify as a buyer, Niarchos set up the North American Shipping & Trading Co., gave 75% of the stock to his U.S.-born sister, Mrs. Mary Dracopoulos, a Greek friend, George Emmanuel, who had become a U.S. citizen, and two American business associates. Though the tankers would thus be technically American-owned and were to fly the U.S. flag, Niarchos arranged a complicated deal by which the ships would be leased to a Panamanian company, thus avoid U.S. taxes. All told, Niarchos’ companies acquired 8 T25 and six freighters for U.S. flag operation.

The Casey Case. The ship-buying tactics of Niarchos and brother-in-law Onassis were blown out into the open when Congress started a stem-to-stern investigation of the immense profits that were made on war surplus ship sales. A congressional committee found that Massachusetts’ former Representative Joseph E. Casey had joined the late, onetime Secretary of State Edward R. Stettinius Jr. and others in 1947 in what seemed like a surefire venture. Tankers were then in such demand that it was possible to make a down payment on a war surplus T2, get a charter from an oil company and then sell either the charter or the ship for a fancy profit.

Casey and his associates bought five T25 from the Maritime Commission, which stipulated that they remain in American hands. The Casey syndicate chartered and later sold the ships to Niarchos’ U.S. companies. With Niarchos’ help, according to Justice Department records, Casey and colleagues in two years avoided paying $1.4 million in U.S. taxes while the ships were under the Panamanian flag, cleared $3.2 million on an initial investment of $101,000.

As a result of the investigation, Casey was indicted, but he later won immunity from prosecution by testifying before a grand jury. In 1953 the Justice Department also started moving against Niarchos, Onassis and other independents. In civil actions against nine of his companies, Niarchos was accused of misrepresenting them as American-owned corporations. Niarchos (who was then in London) and some 20 associates were also indicted on criminal charges; 17 U.S. staffers and consultants were arrested; 19 of his ships were seized. Niarchos argued that the Government’s charges were “technical allegations,” said that the Maritime Commission had not only been familiar with his setup all along but, in all his direct dealings with the Government, had welcomed the chance to sell surplus ships for U.S.-flag operation.

Rather than tie up his ships by a prolonged court battle, Niarchos settled the case out of court, paid an initial fine of $4,000,000. To recover 13 of his ships, he later made a deal with the Government that gave U.S. shipyards a needed boost. In return for permission to transfer the repossessed ships to foreign flags, Niarchos paid an additional $8,579,500 in penalties and agreed to build and register three supertankers (two of 32,650 tons and one 46,000-tonner) in the U.S.

The Bafzanakia. Thus the Government wound up by slapping Niarchos’ wrist. His fines were greatly reduced, in effect, since the 13 ships transferred to foreign registry automatically gained $5,000,000 in value as a result of lower operating costs under flags of convenience. Though it will cost Niarchos up to $325 a ton to build his ships in the U.S., v. $200 in jampacked Japanese yards, he will get far better engineering and faster delivery (by late 1957). As a result of the suits, he also placed 75% of the stock in three of his U.S. companies in trust for his American sons—Philip, 4, and Spyros Nicholas, 14 months.

Niarchos soon had other troubles to contend with. Brother-in-law Onassis, who was then having trouble chartering all his ships, made a deal with King Saud to start a Saudi Arabian merchant marine that might ultimately have turned the independents’ richest market into Onassis’ private domain. Infuriated, Niarchos accused his brother-in-law of trying to monopolize the charter business, successfully teamed up with oilmen and other shipowners to make Onassis back down; the indignant oil companies might even have boycotted Onassis out of business if a tanker shortage had not developed. Shrugged Onassis: “Niarchos gets mad because I move in and sew up a deal while he’s still thinking about it.” Growled a Niarchos aide: “Whenever we start to cultivate something, a rotten mushroom springs up in the flower patch. It’s always Onassis.”

Despite the Greek tradition that bat-zanakia (men who marry sisters) should act like brothers, Niarchos and Onassis went on feuding. When Onassis bought the Monte Carlo Casino, he borrowed part of the purchase price from Niarchos. Though Casino stock has since soared, Niarchos complained bitterly that Onassis refused to repay him more than his original contribution, has taken the dispute to an arbitrator.

At times the rivalry reaches ludicrous extremes. After Niarchos bought the world’s biggest privately owned sailing ship, Onassis had a 325-ft. destroyer escort converted into “the world’s most luxurious yacht,” with a seaplane on the stern. But the feud is not so bitter that the brothers-in-law refuse a chance to make money together. After months of outbidding one another for Greek government permission to build a $24 million drydock in Piraeus, Niarchos recently proposed to undertake the project in partnership with Onassis, with father-in-law Li-vanos as a third partner. The batzanakia are also engaged in a struggle to buy control of T.A.E., Greece’s national airline.

Though the airline has only one weary DC-4 in international service, both Niarchos and Onassis hope to take advantage of its reciprocal landing rights to start flights to the U.S. As a Greek acquaintance observed: “Niarchos and Onassis might have gone far as partners—but not as far as they have gone as rivals.” Cape y. Canal. In the supertanker contest, there is plenty of room for Niarchos, Onassis and all the other Argonauts.

A recent Chase Manhattan Bank survey estimated that free-world oil consumption will increase 73.7% by 1965. By then the free world will be drawing 8.3 million bbls. a day—nearly as much as the U.S.

now produces—from the Middle East. In the past few years the oil companies have leaped into the race, by 1960 will have 172 supertankers in commission, only nine fewer than the independents.

For several reasons, tankers are unlikely to keep growing in size indefinitely.

Since the Suez Canal is only 35 ft. deep, it is too shallow for even a 40,000-ton tanker to pass with a full load. Another major obstacle for supertankers today is that the average U.S. port is only 39.6 ft.

deep, 5 ft. too shallow for any fully loaded tanker over 32,000 tons. As a result, supertankers are forced to discharge up to one-third of their loads onto lighters before entering most ports, e.g., Philadelphia, terminal point for 41% of all world oil shipments.

On the other hand, tankers as big as 100,000 tons may prove a strategic necessity. Many tankermen have been expecting for months that Egypt’s General Nasser would not only seize the Suez Canal (see FOREIGN NEWS), but bar it to Western shipping, to bring pressure on Britain and the U.S. Some supertankers are now bypassing the Canal on the Middle East-California run. If all Europe-and U.S.-bound tankers are forced to round the Cape of Good Hope, more and bigger supertankers will be needed.

Atomic Ship. The shipping industry is already responding to the supertanker success formula: the bigger and faster the ship, the fatter the profit. Aided by the biggest shipping subsidies in peacetime history, long-hungry U.S. shipyards are taking on more and more supership orders, and expect volume to increase. The Maritime Administration estimates that “block obsolescence” of war-built U.S.

merchantmen will soon force shipowners to replace 200 of 1,062 ships sailing under the U.S. flag, spend $1.5 billion for new tonnage in U.S. yards by 1971, v. $500 million since 1946. Moore-McCormack Lines, Grace Line and American President Lines have already announced plans to build 83 new ships for a total of $874 million.

No shipowner keeps a closer watch on tomorrow than Stavros Niarchos. He is building four dry cargo ships against the day, some five years hence, when the last wartime freighters start vanishing from the seas. He is exploring the possibility of roll-on, roll-off ships, and has already ordered his first bulk carriers in Sweden. He is so impressed with the benefits of an atomic-powered ship that he recently told an aide: “Let’s build one now!” The staffer finally convinced him that he was looking too far ahead.

Despite his millions, Niarchos still remains a modest man. “People ask me,” says he, ” ‘If your brother-in-law is worth $150 million, what are you worth?’ I say. ‘Maybe minus $150 million.’ You can never tell what ships are worth. Why someday I may even have to sell the whole fleet for scrap iron.” Few shipping men think that day will ever come—or, if it does, that Niarchos will lose money on the deal.

* Deadweight tonnage, the standard U.S. yardstick for merchant ships, is the number of long tons (2,240 Ibs.) a ship can carry when fully loaded. Other ways of sizing up a ship: displacement tonnage, internationally used to measure naval vessels, is figured by computing the weight of sea water (35 cu. ft. weighs one long ton) a ship displaces when loaded: gross registered tonnage, usually used to measure passenger liners, is a nautical monstrosity, arrived at by computing the total enclosed space on the ship in cubic feet and dividing by 100 to get the tonnage. One deadweight ton equals approximately 1.5 gross tons for most ships.

* U.S. oil companies also operate the bulk of their international fleets under foreign flags, but cannot bring home the profits without paying U.S. corporation taxes. In 1939 the U.S. Government actually encouraged shipping companies to register their fleets in neutral Panama, thus kept vital supplies flowing to Britain without violating U.S. neutrality.