Cargo Ship Gets Ultimatum in Arms Dispute

The ship is called the Katie, and it’s carrying $150 million worth of Canadian military equipment: tanks, armored vehicles and lots of ammunition.

The Katie’s owners say they’re owed money — lots of money — and won’t deliver the goods until they get it. Canada responded by sending two warships and an ultimatum: give us our arms, or be boarded.

“We’re owed approximately $282,000, and until we have a contract resolution that will secure payment to us, the vessel will stay at anchor,” said Peter Margan, head of Annapolis, Md.-based Third Ocean Marine Navigation Company, which owns the ship.

The 750-foot freighter sits in international waters, 140 miles off Newfoundland.

Economic Blackmail?

“We’ve been told if we do not accept the $90,000 offer they would board us. We’ve told the ship’s manager not to resist,” Margan said.

Margan calls the ultimatum “basically the equivalent of economic blackmail” because acceptance would put the company into bankruptcy

A Canadian Foreign Affairs Department spokesman said the government had received permission to board the boat from St. Vincent and the Grenadines, the Caribbean nation where the boat is registered.

“It is one of the options,” Reynald Doiron said.

Captain Vitaly Khlebnikov, skipper of the ship the Katie, told Canada’s CBC-TV’s The National that he could see Canadian warships a little more than a mile away. An Ottawa Citizen reporter who is on the Katie says the captain is concerned for the safety of his crew and ship.

Zev Singer told Canada’s CTV NewsNet that the deadline for meeting the Canadian ultimatum “has come and gone, so we’re waiting by the minute.”

Federal officials haven’t commented on the ship owner’s claim.

How Did This Happen?

How did Canada get into this mess? When its peacekeeping mission in Kosovo ended, Canada needed to get its supplies home. But budget cuts left the nation short on big cargo ships.

So the government hired contractors, who are now locked in a bitter financial battle with the owners of the Katie.

The result: 10 percent of Canada’s military equipment, stranded at sea.

“We’ve become a laughingstock,” said opposition politician Art Hanger. “It is growing into an international incident, an international embarrassment.”

The incident has been more personal by the presence of three Canadian soldiers on the ship, there to guard the cargo. They want to go home.

“We’ve been out of Canada from the first part of December,” said Cpl. Dan Daly. “All we can do on this end is wait.”

Canada does not want to wait much longer, and issued the ultimatum. The Katie’s owners say leave the guns at home.

But Canada says we can’t — they’re stuck at sea.

ABCNEWS’ James Walker and The Associated Press contributed to this report.