The Trump administration is currently weighing the possibility of relaxing sanctions on shadow fleet vessels that have been involved in transporting oil and petroleum products from nations like Russia, Iran, and Venezuela. This consideration aims to address the record-high levels of global freight rates, according to an official from the US.
This discussion comes shortly after President Donald Trump temporarily lifted sanctions on Russian diesel fuel, which drew sharp criticism from Ukrainian President Volodymyr Zelensky, European leaders, and several Republican senators in the US. They argued that this decision essentially offers a financial advantage to Russian President Vladimir Putin, enabling continued funding for the ongoing war in Ukraine.
The focus of the recent talks is on potentially allowing “legal oil” to be transported via previously sanctioned vessels—this would involve crude or petroleum products not under US sanctions, rather than Russian or Iranian oil, which remain penalized.
The intention is to increase the flow of refined products and crude oil from the Gulf region, the official noted. US Energy Secretary Chris Wright mentioned in a video address to the World Petroleum Congress in Riyadh that easing sanctions on shadow fleet ships was part of efforts to lower freight rates, which have impacted the demand for US crude, as highlighted by a research group, Energy Aspects.
Some snippets of the address were shared on social media, though Reuters was unable to acquire the complete video or transcript. The Department of Energy, when approached for comment, stated they were unavailable for further discussions.
Any companies wishing to utilize the sanctioned vessels would need to apply through the US Treasury Department, according to the official. The Department of Energy also mentioned that any relaxation of sanctions on shadow fleet vessels would not benefit Russia in moving oil or oil products.
As for Trump’s quick push to reintroduce Russian diesel to the global marketplace, it could create pressure on the relevant departments to permit such shipments through these vessels. The White House has yet to comment on this matter.
Given the current high oil and fuel prices, there are concerns tied to the upcoming November 3 midterm elections, in which Republicans aim to retain their control over both chambers of Congress. The sanctions on Russian diesel have been lifted until April 7.
RECORD HIGHS
The rise in tanker freight rates has reached unprecedented levels, driven by the conflicts in Iran and Ukraine, which have intensified inflation and made US crude oil less accessible for Asian refiners, leading them to seek alternatives in the Middle East and Latin America.
Energy Aspects remarked in a communication to their clients that while easing sanctions on the shadow fleet might not significantly influence freight rates, it could facilitate more oil movement in the Middle East.
Relaxing the sanctions on aging and poorly maintained tankers is unlikely to provide an immediate increase in mainstream fleet capacity, especially since many of these vessels, flagged for Russian or Venezuelan ties, have been in active trade recently. Easing the measures could, however, make a small number of additional tankers available for certain shuttle runs through the Strait of Hormuz, the critical waterway between Iran and Oman.
Nonetheless, the overall impact on freight rates is expected to be minimal, as ship insurers will continue to be subject to EU and UK regulations, according to maritime industry sources.
