U.S Considers Lifting Sanctions On Shadow Fleet Tankers To Ease Record-High Global Freight Rates

The United States is considering lifting sanctions on some shadow fleet tankers to help move more oil from the Gulf and reduce record-high shipping costs, a US official said on Wednesday.

The plan would allow some previously sanctioned tankers to carry oil and petroleum products that are not banned under US sanctions. It would not allow them to transport Russian or Iranian oil that remains under US restrictions.

The talks come as wars involving Iran and Ukraine have driven tanker freight rates to record highs. Higher shipping costs have made US crude more expensive for Asian refiners, leading them to seek oil supplies from the Middle East and Latin America.

Companies wanting to buy the sanctioned tankers would need approval from the US Treasury Department, the official said.

The Treasury said it reviews each case before removing sanctions. Its Office of Foreign Assets Control may approve a sale and lift sanctions on a vessel if a legitimate buyer wants to purchase it and return it to commercial use. Each application would be considered separately.

US Energy Secretary Chris Wright also spoke about easing sanctions on shadow fleet tankers at the World Petroleum Congress in Riyadh this week, according to research group Energy Aspects.

Parts of his remarks appeared on social media, but Reuters could not obtain the full video or a transcript. The US Department of Energy said the video was not available.

The department said easing sanctions on these vessels would not help Russia move oil or petroleum products. The Treasury referred questions to the Energy Department, while the White House did not immediately respond to a request for comment.

The talks follow President Donald Trump’s decision to temporarily lift sanctions on Russian diesel fuel. Ukrainian President Volodymyr Zelenskiy, several European countries and some Republican senators criticised the move, saying it could give Russian President Vladimir Putin more money to fund the war in Ukraine.

The temporary suspension of the diesel sanctions is due to last until April 7.

Research group Energy Aspects said lifting sanctions on some shadow fleet tankers was unlikely to bring down global freight rates by much. However, it could help more oil move through the Middle East.

Many of these tankers are old and poorly maintained. Energy Aspects said they were unlikely to add much capacity to the main commercial fleet in the short term. It also said most tankers sanctioned over links to Russia or Venezuela had continued trading during the previous three months.

Lifting some restrictions could make a small number of additional tankers available for short shuttle trips through the Strait of Hormuz, between Iran and Oman, the group said.

Insurance rules could also limit the effect. Maritime industry sources said ship insurers would still have to follow European Union and UK regulations, even if the US eased its sanctions.

Tanker freight rates have risen to record levels as the wars involving Iran and Ukraine have added to inflation and increased the cost of moving oil. Higher transport costs have also made US crude less attractive to some Asian refiners.

High oil and fuel prices are a concern for Trump ahead of the November 3 US midterm elections. Republicans are seeking to retain control of both chambers of Congress.

The administration is looking for ways to move more crude oil and refined products from the Gulf while reducing shipping costs.

The US has not announced a final decision on the proposed changes. The Treasury may review applications individually, while Energy Aspects expects any additional tankers to have only a limited effect on overall freight rates.

References: Reuters, TOI