US Plan to Revive Sanctioned Tankers Faces Tough Sell
The Trump administration’s plan to rehabilitate sanctioned tankers to boost oil supply may attract only a sliver of the dark fleet, as existing contracts, complex compliance checks, and sky-high freight rates reduce incentives for would-be sellers. The measure, detailed on Monday, is the latest in a string of efforts by the Trump administration to cool crude and fuel prices driven higher by months of war in the Persian Gulf and the ongoing conflict between Russia and Ukraine.
Soaring gasoline and diesel costs in particular have fueled affordability concerns among US voters. However, with limited numbers of sanctioned supertankers actually available and would-be sellers unwilling to forgo lucrative crossings in the Middle East, industry analysts say the effort to revive so-called dark vessels may struggle to gain traction.
Sanctions Relief Does Not Equal Mainstream Capacity
“Sanctions relief does not equal immediately usable mainstream tanker capacity,” said Rahul Kapoor, global head of shipping analytics and research for S&P Global Energy. “The number of vessels that could realistically migrate back into mainstream trading would likely be materially smaller than the overall sanctioned fleet.” The US proposal allows blacklisted vessels to be sold and rejoin the legitimate fleet, but does not lift existing sanctions.
Practical Challenges Abound
A wider plan would meet different hurdles — including the absence of financial incentives to sell up. Even though ships’ resale values have climbed in recent months, soaring freight rates mean that shipowners are still motivated to keep their vessels operating. A supertanker shuttling through the Strait of Hormuz can fetch as much as $40 million per trip, shipbrokers say.
There are also practical challenges, including the simple availability of vessels not already under contract, and the fact that the European Union and the United Kingdom not only also blacklist vessels but also dominate maritime insurance cover, potentially limiting unilateral efforts. Then there is age — 70% of sanctioned tankers free from EU or UK penalties are above 20 years old and unpalatable to mainstream traders.
Gradual Capacity Return Expected
“Any capacity return is likely to be gradual rather than immediate,” Oil Brokerage analyst Ting Jun Jie said. Fuel costs have been a pressing concern for the Trump administration, and efforts to cool oil prices over recent months have included periodic waivers on sanctioned oil and a diesel export deal with Russia.
Brent remains near a five-month high, however, and a supercharged freight rally shows no signs of slowing. “The administration is doing all these things to bring down prices,” said Karnan Thirupathy, partner at Wotton Kearney who advises clients on sanctions compliance and other regulatory issues on global shipping.
Original Article: Trump’s Plan to Revive Sanctioned Tankers Faces Tough Sell — Gcaptain