The lifting of U.S. sanctions on shadow fleet tankers could redirect ships from Russian oil trade towards the Middle East while simultaneously increasing the transportation costs of Russian oil. This shift may lead to a reduction in some tanker shortages in the Strait of Hormuz.
Status of Tankers and Sanctions
According to analysts, the number of oil and LPG tankers sanctioned by Western authorities reached 1,226 by the end of August. The United States has particularly targeted VLCC-type tankers. However, estimates from BRS Shipbrokers indicate that only 148 tankers in international trades are under sanctions from the U.S. Office of Foreign Assets Control, which is equivalent to 2.5 percent of the total tankers based on the number of ships.
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Potential Changes in Tanker Rates
On October 19, the transportation rate for 265,000 tons of crude oil from the Persian Gulf to Western India reached $95.83 per ton, significantly higher than the pre-crisis level of $19.15 per ton on February 27. This rate increase is due to the likelihood of a shift in tanker usage towards Middle Eastern trades instead of Russian trades.
Recent analyses indicate that about 84 percent of the sanctioned tankers solely by the U.S. are located in the Middle East, the Indian Ocean, or East Asia. These ships may be allocated to shuttle services in the Strait of Hormuz. Given the recent attacks that have limited tanker supply, some previously sanctioned tankers are expected to be attractive options for shuttle services between Hormuz.
At the same time, the lifting of sanctions may allow some shadow fleet operators to sell their tankers to a strong second-hand market. The price of 15-year-old VLCC tankers has increased by 177 percent over the past year, reaching $160 million.
However, concerns about the condition of the ships and their operations still exist. 70 percent of the tankers on the OFAC list are at least 20 years old, and without proper insurance and financing, hiring them will be difficult for major employers.
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