Sanctions chill but do not freeze Iran fixture activity

The unilateral US re-imposition of sanctions on Iran is already making waves in the freight sector, despite the provisions for a 180-day "winding-down" period for existing business. The — perhaps deliberate — ambiguity of US guidance on the 180-day period has created great uncertainty. Insurance provision is a sanctionable activity and that is a particular concern for shipowners, Protection and Indemnity (P&I) clubs and their legal advisers. As a result many — but not all — shipowners are shying away from Iranian business.

Many shipowners surveyed by Argus specifically cite concerns about P&I coverage as a reason for not taking fresh Iranian cargoes from 8 May, the date US president Donald Trump announced his sanctions move. One tanker firm declared itself ready and willing to do further business with Iran, but only after it received the "blessing" of its P&I providers, themselves awaiting clarity on the legal situation for the 180-day period. Most others were more reticent about further engagement with Iran, stepping back from Iranian deals pending legal clarity.

Publicly, P&I clubs have urged caution and the London Protection and Indemnity Club — part of the wider International Group of P&I Clubs — warned that any transactions with Iran entered into after 8 May might be subject to US sanctions. The P&I clubs are still waiting to see what action the European signatories to the nuclear deal — the UK, France, Germany and the EU — plan to take. An EU statement today gave some colour but little detail. Some in the freight market hope that EU blocking legislation will allow European companies to continue to do business with Iran, or that nations or specific companies might be able to secure exemptions from the US authorities. However, even with some of those measures in place, the issue of access to the US financial system could still discourage European businesses from engaging further with Iran.

Some legal advisers have been more explicit than the P&I clubs, with US law firm ReedSmith stating that when "charters post-date 8 May 2018, it is highly likely that calls to Iran should be avoided".

But some European charterers and shipowners continue to attempt Iranian business. At least eight tankers have been placed on subjects for Iranian cargoes since the start of last week. And although many may have been on subjects before the 8 May cut-off, at least one deal has been done subsequently by Saras. The Italian charterer lifted subjects on the Episkopi this week and the Suezmax will load at Kharg Island from 27 May for delivery to Sarroch refinery. The Episkopi is owned by Greek shipowner Avin International, and was a replacement for the previously-failed Minerva Marina, part of the fleet belonging to another Greek owner, Minerva Marine.

In addition to the Minerva Marina, two other vessels with European owners and destinations have already failed. Hungary's OMV extended subjects for the Suezmax Ithaki Warrior, owned by Greece's Polembros, several times before the vessel was failed for a 1 June Kharg island cargo. Freight market participants said that the charterer is not looking to replace the Ithaki Warrior. And Spain's Cepsa failed the 1mn bl, Eurotankers-owned Eurospirit for a 29 May Kharg cargo, although the tanker was off the coast of Oman today.

The Morviken — a Suezmax owned by Norway's Viken Shipping but relet to Total — is due to reach Iran on 22 May to load a cargo for the French charterer. That voyage was likely booked before the 8 May and the Norwegian owner told Argus that "for the time being, there appear to be no immediate changes to the current sanctions position for non-US persons and US authorities will allow foreign persons to wind down their Iran related activities." Italy's Eni fixed the Ottoman Integrity — a Suezmax owned by Turkish shipowner Gungen Denizcilik — for an Iranian shipment and market participants suggest that deal was concluded after 8 May but before the P&I clubs warned that fresh business during the 180-day period might be in breach of sanctions. The Ottoman Integrity remains on track to load in Iran at the end of this month. Similarly, Chilean state-owned Enap may have chartered the 1mn bl Monte Toledo before the 8 May cut-off.

The US sanctions do not appear to have had any impact on eastbound shipments from Iran, although the latest bookings — of the Deep Sea and the New Dragon — may also pre-date 8 May. Last week, Indian state-controlled refiner BPCL chartered VLCC Deep Sea from Iranian state-owned NITC to load at Kharg for delivery to Sikka and the tanker moved into position at the terminal yesterday evening. China's Unipec chartered the New Dragon — a VLCC owned by the Nanjing Tanker Corporation, a subsidiary of state-owned Sinotrans & CSC — to load at Kharg later this month and the vessel is currently signalling for Fujairah, UAE, likely to be a way-point before it passes the Straits of Hormuz.

Sanctions against insurance provisions could also prevent Iran's tankers from visiting Europe, although the net impact on the activity of the Iranian fleet might be modest, given its continued focus on destinations in Asia. NITC's tanker fleet has delivered to ports in Europe since securing coverage through a group of European P&I clubs in August 2016. But the fleet — which comprises 42 VLCCs and 11 Suezmaxes — has largely continued to ply routes east of Suez. Of the 40 NITC vessels currently transmitting transponder signals, none are signalling a European port as their next destination, and all but three are currently east of Suez. One of the exceptions is the Huge, a VLCC that has just unloaded at Algeciras, Spain, as part of a voyage agreed with Cepsa well before the US decision. The other two tankers are currently off Venezuela and Nigeria.