Oil Traders In Talks With US To Get Sanctioned Ships Back To Sea

A sanctioned tanker is a vessel placed on the US government’s blacklist because of involvement in illicit oil shipping. The designation can block companies from buying, leasing, insuring, or otherwise dealing with the vessel without government permission. The goal is to restrict the ship’s ability to support prohibited trade and keep money from reaching bad actors.

The article says some sanctioned ships were used in the so-called dark fleet, whose vessels often switch off satellite signals. The United States has sanctioned 1,568 ships, including 462 crude oil tankers. Treasury officials are considering licenses that could make selected ships legitimate for approved cargoes.

The policy creates a difficult balance. Reusing vessels could ease a tanker shortage and reduce freight costs. But allowing transactions could also send cash toward people involved in illicit trade. Officials are therefore considering applications individually, not granting a blanket exemption. Safety is another concern because many sanctioned ships are older than the mainstream fleet.

At least four companies are discussing permission to buy or lease selected sanctioned tankers. They are Trafigura Group, Vitol Group, Mercuria Energy Group Ltd., and Abu Dhabi National Oil Co., also known as ADNOC in the article. Their aim is to add vessels during a severe shipping crunch.

The approval would come through licenses from the US Treasury or the Office of Foreign Assets Control, known as OFAC. Those licenses could permit transactions involving vessels that are otherwise blocked by US sanctions. Treasury officials are reviewing applications individually. The discussions cover about 50 ships, including some supertankers capable of carrying 2 million barrels.

No approval was final when the article was published. The timing was unclear, and the companies declined to comment. Any authorization would apply only to ships sanctioned by the United States. European Union and UK restrictions on Russian and Iranian oil would still affect the wider trading environment and some vessels.

The proposed program is limited compared with the full US sanctions list. People familiar with the talks said applications cover about 50 of roughly 1,600 ships currently sanctioned by the United States. That is only a small portion of the sanctioned fleet, rather than a broad return to service.

The vessels include supertankers, the largest ships in the oil industry. A supertanker can carry about 2 million barrels. The applicants are considering ships that could be purchased or leased, refurbished, and used to transport non-sanctioned oil. The administration has described this idea as converting “dark tankers to legitimate tankers.”

The final number could remain uncertain because no decision had been made. Treasury officials may approve applications one by one. The impact would also depend on which ships return. Rehabilitating idled vessels could add more capacity than merely changing the status of ships already operating in the dark fleet.

The US and Israel’s war on Iran triggered what the article calls the worst supply disruption in history. Tankers became scarce as traders struggled to secure crude and faced risks around the Strait of Hormuz. With fewer practical shipping options, freight rates rose sharply. Freight is a major part of the price ultimately paid for oil.

Ships were forced to take longer voyages to secure supplies. Charterers also had to pay higher insurance fees because of the risks around the waterway. The result was a rapid increase in the cost of moving crude. Sending US oil to Asia in a supertanker cost nearly $40 a barrel in early October, compared with $5 a year earlier.

Rates later softened but remained near historical highs. That helped keep oil prices around $100 a barrel. The proposed tanker licenses are intended to add usable capacity, but their effect would depend on which ships are approved, refurbished, and safe to operate.

Returning idled or older tankers could lower shipping costs by expanding the usable fleet. Oil prices include freight, so cheaper and more available transport can reduce the cost of delivering crude. The effect would be strongest if the ships add capacity that was previously unavailable, rather than simply changing paperwork for vessels already moving oil.

The article gives the example of Skipper, which had been sitting off Texas since December. It says repurposing such an idle tanker could have more impact. Older sanctioned ships might handle short trips between the United States, the Caribbean, or Latin America. That would free newer tankers for longer voyages.

The savings are not guaranteed. Many sanctioned ships are older than the mainstream fleet, raising maintenance and safety concerns. Licenses would also be decided case by case. Still, restoring idle capacity could reduce pressure on charterers, insurance, and freight rates, potentially easing oil prices that were near $100 a barrel.

If sanctioned vessels cannot be used, traders still need to move crude with ships that are not blocked by US, European Union, or UK restrictions. The article indicates that available vessels may be sent on longer voyages to secure supplies. Newer tankers can also remain on long-haul routes, while other ships handle nearby cargoes where possible.

Longer voyages consume more time and reduce how many trips each tanker can complete. That effectively tightens capacity. The article also says charterers have had to pay higher insurance fees because of risks near the Strait of Hormuz. Together, longer routes and costlier cover raise the expense of each barrel delivered.

These alternatives can keep supply moving, but they do not necessarily lower prices. Freight rates had softened from their peak yet remained near historical highs. Traders therefore want additional vessels, while governments must ensure that any approved ships carry non-sanctioned oil and do not channel money to bad actors.

The global oil market depends on tankers because crude often must travel long distances from producing regions to consuming markets. Tanker availability determines how much oil can move and how quickly. Freight rates then become part of the delivered price. When ships are scarce, the transport bill rises even if the crude itself is unchanged.

Insurance is another essential cost. The article says vessels traveling near the Strait of Hormuz faced serious risks, forcing charterers to pay higher insurance fees. Sanctions add a legal barrier by blacklisting ships involved in illicit oil shipping. Companies cannot freely buy or lease those vessels unless the United States grants permission.

These forces interact. War-related disruption reduced practical supply, longer voyages absorbed capacity, and high insurance pushed costs higher. The United States is considering licenses for about 50 sanctioned ships to expand transport options. But EU and UK restrictions, vessel safety, and enforcement against the dark fleet still shape which ships can operate.