Global Ship Recycler Sees U.S. Recycling License as Blueprint to Retire Shadow Fleet Vessels
Global ship recycler Global Marketing Systems (GMS) says a recent U.S. government license authorizing the recycling of four sanctioned vessels could provide a long-sought legal pathway for retiring aging ships operating in the so-called shadow fleet, potentially reducing safety and environmental risks while reinforcing sanctions enforcement.
Speaking during a recent Capital Link Expert Talks webcast, GMS Founder and CEO Dr. Anil Sharma said the U.S. Treasury’s Office of Foreign Assets Control (OFAC) approved the first licensed recycling transaction involving sanctioned vessels earlier this year after months of discussions with U.S. authorities.
According to Sharma, the approval represents more than a one-off transaction involving four container ships. Instead, he argues it establishes a precedent for how governments could permanently remove sanctioned vessels from service through tightly controlled, case-by-case recycling transactions.
Shadow Fleet Grows as Sanctions Enforcement Lags
The issue has become increasingly relevant as Western sanctions on Russian, Iranian and Venezuelan oil exports have fueled the growth of a vast shadow fleet of aging tankers operating outside mainstream shipping markets. Many of these vessels sail with opaque ownership structures, limited insurance and questionable maintenance, raising concerns among regulators and industry groups about navigational safety and the risk of a major pollution incident.
Sharma said the lack of a legal disposal mechanism has effectively trapped many sanctioned ships in service.
Licensed Recycling as Terminal Action
He stressed that the OFAC license should not be viewed as a relaxation of sanctions or a commercial opportunity to trade sanctioned assets. Instead, he described licensed recycling as a “terminal action” that permanently removes vessels from commerce, preventing them from returning to sanctioned trades under new ownership or flags.
The process itself remains highly complex. According to Sharma, each transaction requires extensive legal reviews across multiple sanctions regimes, regulatory approvals, financial scrutiny, operational planning and documentation demonstrating that the vessel has been permanently dismantled.
Environmental Risk and Sanctions Enforcement
Environmental risk was another central theme of the discussion. Sharma warned that many shadow fleet vessels continue operating with limited oversight and cited historical tanker accidents, as well as the international effort to prevent a disaster involving Yemen’s decaying FSO Safer, as examples of the potential costs of allowing aging ships to remain in service indefinitely.
Looking ahead, Sharma said future recycling approvals will likely require coordination among multiple jurisdictions, including U.S., European Union and U.K. sanctions authorities, as well as banks, insurers, classification societies, flag states and recycling nations.
While each transaction may be unique, Sharma emphasized that the licensed recycling process has the potential to strengthen sanctions policy rather than weaken it by steadily shrinking the fleet available for sanctioned commerce.
Original Article: GMS Sees U.S. Recycling License as Blueprint to Retire Shadow Fleet Vessels — Gcaptain