US Considers Easing Sanctions on Shadow Fleet Vessels to Cut Freight Rates
The Trump administration is considering easing sanctions on so-called shadow fleet vessels that have transported oil and petroleum products from countries including Russia, Iran, and Venezuela, in an effort to reduce record-high global freight rates. A US official said the discussions are happening days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel, a move met with criticism from Ukrainian President Volodymyr Zelenskiy, European countries, and some of Trump’s fellow Republicans in the US Senate.
The new talks center on the United States potentially allowing “legal oil” to flow on previously sanctioned vessels, the US official said. That means crude or petroleum products not sanctioned by Washington, rather than Russian and Iranian oil, which are under punitive measures. The goal is to get more refined products and crude out of the Gulf.
Sanctions Easing Could Cut Freight Rates
US Energy Secretary Chris Wright said in a video to the World Petroleum Congress in Riyadh this week that the administration was talking about easing the sanctions on shadow fleet vessels in an effort to cut record freight rates that have cut into demand for US crude, according to Energy Aspects, a research group. Companies seeking to use the sanctioned vessels would have to apply to the US Treasury Department to use the vessels.
The Department of Energy said any move to relieve sanctions on the shadow fleet would not help Russia to move oil or oil products. The Treasury Department referred questions to the Department of Energy. However, Trump’s push to move Russian diesel to global markets quickly could put pressure on the departments to allow shipment via the vessels.
Tanker Freight Rates Soar to Record Highs
Tanker freight rates have soared to record highs as the wars in Iran and Ukraine have stoked inflation and put US crude oil out of reach for Asian refiners, pushing them to seek alternatives from the Middle East and Latin America. Energy Aspects said in a note to clients that easing the sanctions on the shadow fleet would not greatly impact freight rates but could allow more movement of oil in the Middle East.
Lifting the sanctions on the tankers that are mostly old and not well maintained is “unlikely to add meaningful mainstream fleet capacity overnight, especially as most tankers sanctioned over Russian or Venezuelan links have been actively trading over the past three months,” it said in the note. Easing the restrictions could make a small number of additional tankers available for certain Strait of Hormuz shuttle runs, in the waterway between Iran and Oman.
The White House did not respond immediately to a request for comment.
Original Article: US considers easing sanctions on shadow fleet vessels to cut freight rates — Jpost