US lifts sanctions against COSCO’s tanker operation

U.S. persons and companies are generally prohibited from conducting business with individuals or entities on the SDN List. Additionally, any entities owned 50% or more in the aggregate by these listed individuals are blocked.

However, the sanctions did not apply to COSCO Shipping Tanker’s parent, COSCO Shipping Corp. Ltd., or its other nontanker corporate affiliates.

The lifting of the sanctions against COSCO Shipping Tanker was good news for the oil transport sector.

“The effect of the sanctions was a reduction in supply, and as a result, tanker rates were still reasonably high,” wrote Ben Nolan, Stifel Maritime analyst, in a note on Friday. “With the lifting of sanctions, about 2-3% of the global crude tanker fleet (particularly the VLCCs) will immediately rejoin the global trading fleet and drive tanker rates down.”

Nolan estimated that 20-25 VLCCs (very large crude carriers) of an estimated global fleet of about 800 were idled or “underutilized” after OFAC imposed the sanctions against the Chinese tanker operators.

Meanwhile, crude tanker rates currently face a “negative headwind,” Nolan said.

“Crude tanker rates have already been falling this year, with VLCC rates down from about $100,000/day to closer to $50,000/day currently,” he said.

The U.S. continues to strengthen its use of sanctions against Iran’s oil supply since leaving the international Iran nuclear treaty in 2018. Numerous Iranian and foreign entities and individuals, as well as vessels, have since been placed on the SDN List for their alleged role in transporting Iranian oil, which the U.S. said helps finance the activities of the Islamic Revolutionary Guard Corps-Qods (IRGC-QF).