Harry Vafias, President and Chief Executive Officer of StealthGas, is viewed by many as Greece's shipping's whiz kid and potentially the shipping success story of the early 21st century that conjures memories of bygone days. Despite being just 32 years old, Vafias already controls Greece's third largest fleet by numbers and was the youngest CEO of any shipping company worldwide when he listed StealthGas on New York's NASDAQ market in 2005. In an exclusive in-depth interview in mid-April, Harry Vafias talked about his company, its history, as well as his views on the shipping industry, the growing scourge of piracy on the high seas and the Greek economy.

Harry Vafias began his shipping career at the tender age of 21 and has since built-up a billion-dollar shipping empire. He has not forgotten his humble roots from the eastern Aegean island of Chios, where his grandfather, Haralambos, came from, and how he toiled to build a successful business from scratch. It started in the interwar years, with a small rowing boat that his grandfather used to transport livestock to nearby Oinousses, before going on to seek his fortune in far-away Argentina, where he eventually became a successful meat trader. Despite initial resistance from the family, Harry's father chose to go into the risky shipping business in 1973 and acquired a 30-year-old tween decker, instead of following in the safe haven of his own father's footsteps and the well-established meat trading business. Years later, he helped Harry get started in shipping with a loan of $4 million in 1999. Contrary to advice from his father, Harry Vafias took the bold and risky decision to go into tankers and started Stealth Maritime. Within a year, he had bought four single-hull Aframaxes, all around 18-20 years old. Much has happened since then and Harry, who now controls 72 vessels, is currently in charge of the oil and gas sector of the high-flying group, and he has only just gotten started.

Business File discussed a diverse range of issues with Vafias, spanning his early business choices, prospects for the Greek and global shipping industry, and his views on the Greek economic crisis. Some excerpts from the full interview follow:

Q. How many vessels do you own, manage and have on order?

A. We own 72 across the board. We are the third largest company Greece in terms of the number of ships. We manage about half, the rest are either on bareboat or are managed by third-party managers. We cancelled 13 newbuildings in the last two years. These consisted of four Suezmaxes in China, four post Panamax bulkers in China, four gas ships in Turkey and one product carrier in China. And for all these cancellations we paid $16 million total, which, when you think about it, is pretty good, as it is only just over $1 million per ship. After all these cancellations, we have the following new buildings: one Cape in China remaining, three Aframaxes, two in Korea and one in China, and five LPGs, all in Japan.

Q. Why have you cancelled these newbuildings?

A. Mainly because of the drop in prices, as we had ordered them close to the peak.

Q. Do you foresee a bounce back in the values of vessels, and in which sectors?

A. At the moment I am very optimistic on gas for 2011, optimistic on tankers, not optimistic on dry and pessimistic on containers. This is my view for next year, for a variety of reasons. On gas, I am optimistic for two reasons. One, it's the smallest order book than any other segment, and two, you see huge demand from developing nations. Don't forget that LPG is the first energy source that developing nations use when they stop burning wood, so it's very important. […]

Q. How do you see the wet and dry markets?

A. I am a big believer of the wet. That's why we invested close to $1.2 billion between 2007 and 2009 to buy close to 16 brand new Aframaxes and product carriers. And that's not a public company. We actually put our money where our mouth is, as we put equity from the family company. Our biggest investment overall out of any sector was in tankers. Whether it was a good decision will be proven in the next five years, but we are big believers in the wet sector. We just bought another tanker last week. I'm not that optimistic for 2010, but for 2011 I am quite optimistic because you have the single-hull banning, you have a lot of new demand coming from areas not so affected by the crisis. You have people in poorer countries, mainly in the Far East, who are buying cars and motorbikes, many of these people having only had bicycles a few years ago. This means a huge rise in gasoline consumption. You have many new factories that need oil or coal to produce, and oil is also affected by political factors. Political uncertainty pushes freight rates up. I think 2010 will be a good year for tankers, if they don't kill it again by people ordering too many new ships. A lot of VLCCs have also converted to iron-ore carriers, which also takes a huge amount of supply out of the market. That's why I'm optimistic about 2011. […]

Q. Shipping is a cyclical business. Have people learnt lessons from the past? Have banks overextended themselves or changed their lending policies?

A. The banks have not overextended themselves in shipping. They have overextended themselves in other toxic products and that's why they have asked their shareholders for money, or got governmental support or had to merge or had to be saved by a white knight. Some German banks were overexposed to the container sector, but I guess they have learnt a lesson.

Q. Will this mean that some people in the world of shipping will find it harder to get loans or funding?

A. For all people, funding is much more difficult than it was in 2008, for everyone, from the worst quality company to the best. Everybody's funding costs have gone up significantly. But that's the market. […]

Q. How do you see Greek shipping doing in the future? Do you think more owners will return to the Greek flag or more Greek shipowners who are currently based outside Greece will bring their operations to Greece?

A. It depends on the state of the Greek economy and I think the Greek economy will get worse before it gets better, which means that we will see the reverse of what we saw in the past. In the past, we saw people from London and New York who were Greeks moving to Greece, because life was good, it was cheaper, staff wanted to relocate back to their country and no tax. All these were good things. Now everything has become worse. More tax, not on shipping, but on other things; it has become very dangerous, crime rates have exploded with murders, muggings and theft. There have even been kidnappings, and not only of shipowners. You have to have bodyguards. This is not a good quality of life. Where are we, in Colombia? This is ridiculous for a European country. People are now saying the opposite. They are thinking of moving and going to tax-free havens like Cyprus, Monaco, Singapore, even back to London. […]

Q. How concerned are you about the current situation in the Greek economy with the latest fiscal crisis?

A. I think Greece is going to go bankrupt, not this year, but I am very worried.

Q. What do you think needs to be done?

A. What needs to be done cannot be done because there would be a revolution. Firstly, they need to cut the number of public servants to half, and that will never happen. Secondly, they need to increase their income from direct taxes, which again will not happen because more than 95 per cent of Greeks declare an income of less than 1,000 euros a month. The 30 most recognisable entrepreneurs in Greece were invited last week by the Head of the Central Bank, to give ideas, and I can tell you that all of them, except one maybe, were very pessimistic because the government takes half-measures and the situation is so grave that it cannot be resolved in this manner.

Q. Do you not think that now is an opportunity to deal with many of the long-lasting economic problems that Greece faces? After all Greeks are very industrious and hard-working and the often prove this when they are here or especially when they go abroad and often excel and succeed in their chosen fields.

A. When they go abroad, they work harder. The problem here is so huge that if the public servants do not get fired, which they cannot under the Constitution, and if they don't increase tax revenues from income, the country will go bankrupt. That's it, finito!

(See full interview on page 30)