Iran is on a discreet mission to procure second-hand oil tankers in order to keep exporting crude oil. This comes after U.S. sanctions on its oil and shipping industries scared Western banks, insurers, and commercial shipping operators, Reuters reported, citing sources from Iran and from Western countries.
Days after U.S. sanctions on Iran’s oil, shipping, and insurance industries returned in early November, the Special Representative for Iran Brian Hook said at a press briefing that “If Iranian tankers make calls to your ports or transit through your waterways, this comes at great risk.”
“From the Suez Canal to the Strait of Malacca and all chokepoints in between, Iranian tankers are now a floating liability,” Hook said.
Iran has more than 50 tankers, but this month, for example, it’s using 12 of those to store oil in floating storage at sea, according to MarineTraffic data cited by Reuters.
Iran has resorted to floating storage again after the U.S. sanctions have removed more than 1 million bpd of Iranian oil exports from the market since November.
The U.S. sanctions have also resulted in stalled early negotiations between Iran and South Korea for new supertankers, while Panama has de-flagged many Iranian ships from its registry, according to Reuters’ sources.
Shipping sources tell Reuters that this time around it will be more difficult for Iran to procure ships than it was with the previous round of sanctions due to increased scrutiny and because businesses don’t want to be involved in anything linked to Iran for fear of running afoul of the U.S. sanctions.
A senior Iranian official told Reuters that “Plenty of countries are happy to do business with Iran,” adding that there are several ways to cope with the shortage of tankers, including using tankers of other countries.
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While tracking Iran’s oil exports has become an increasingly difficult task after the U.S. sanctions returned, some of the key Iranian oil customers that received U.S. waivers resumed buying Iran’s oil in 2019 or increased imports to their respective ceiling allowed under the waivers, after an initial ‘wait-and-see mode’ for November and December purchases amid uncertainties as to who was getting waivers.
The U.S. has signaled that Iranian customers shouldn’t rely on waiver extensions, but the Trump Administration has not yet officially said if it would stop granting waivers. It is likely that that decision will depend on the price of oil when the U.S. needs to decide about exemptions, because, despite the pledge for ‘zero’ Iranian exports, the Administration will not be willing to drive oil prices up too high.
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By Tsvetana Paraskova for Oilprice.com
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Moreover, countries which were granted sanction with the exception of South Korea and Japan waivers will continue to buy Iranian crude oil with or without waivers.
Still, the Trump administration has no alternative but to renew the sanction waivers when they expire in May or issue new ones for no other reason than to use them as a fig leaf to mask the fact that US sanctions have yet to cost Iran the loss of even a single barrel and the fact that the zero exports option is a bridge too far.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London