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. This move comes days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel, a decision met with criticism from Ukrainian President Volodymyr Zelensky, European countries, and some of Trump’s fellow Republicans in the US Senate.
The discussions center on the United States potentially allowing “legal oil” to flow on previously sanctioned vessels, according to a US official. This 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, said the official.
Energy Secretary Weighs In
US Energy Secretary Chris Wright recently spoke about easing 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. Wright’s comments were made during a video address to the World Petroleum Congress in Riyadh this week.
Sanctions Relief Process
Companies seeking to use the sanctioned vessels would have to apply to the US Treasury Department to use the vessels, said the official. The Department of Energy emphasized that 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.
Freight Rate Pressure
High oil and fuel prices are a risk for Trump in the November 3 midterm elections, in which Republicans are hoping to maintain control of both chambers of Congress. He lifted the sanctions on Russian diesel through April 7. 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.
Impact on Freight Rates
Easing the restrictions could make a small number of additional tankers available for certain shuttle runs, according to Energy Aspects. However, 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.”
Original Article: US considers easing sanctions on shadow fleet vessels to cut freight rates, official says — Nypost