An unintended side-effect of US sanctions over the past few years has been the rule that the sanctioned entities cannot be paid money for anything, even if that cash would be related to disentangling two parties, one of them in the West and one of them sanctioned.
The US Treasury has now authorized a demolition sale for four sanctioned vessels linked to the Shamkhani shipping network, a sanctioned company alleged to have moved millions of barrels of Iranian oil to market. The anonymous owners of these four ships will receive millions of dollars in payment for the scrap value, cash buyer GMS confirmed to the Wall Street Journal, under special approval from the Trump administration.
According to the Treasury, the ships belonged to the network of Iranian “shadow fleet” industry leader Mohammad Hossein Shamkhani, who is the son of the late senior Iranian advisor Ali Shamkhani, who was killed in an airstrike in February. The administration had sanctioned more than 50 of the Shamkhani network’s ships, including the four vessels now authorized for sale, identified by the WSJ as the Yogi, Timon, Rantanplan and Bigli.
Sanctioned vessels are not easy to sell, although substantial numbers of sanctioned “shadow fleet” vessels have been reaching the beach at Alang in recent months under fake documentation, according to cash buyer Wirana. However, India has begun cracking down on the practice with more detailed document checks. US Treasury authorization for a sanctioned ship sale, such as the one granted to GMS last week, would make it easier for a shipbreaker to buy and import the hull.
One reason for the US Treasury to grant such waivers to companies like GMS is that the alternative for effectively sanctioned companies is not a good look for anyone. There are several non-revenue-generating options, and one of them is just abandoning the vessel and crew – a practice that has been increasing in recent years. Sanctioned ships are sold for scrapping at discount rates, according to Wirana, and are therefore a desirable source of steel for shipbreakers. Economically, it makes sense for the world shipping industry, but the sanctions were making it impossible.
GMS argues that there are owners who would like to get out of sanctioned trades, but they cannot afford to do so because the Treasury prohibits them from selling their blacklisted ships.
Since the start of the year, according to the WSJ, GMS has sought a licence from the US to purchase sanctioned shadow fleet tonnage for resale to shipbreakers, generally in Bangladesh, India and Pakistan. However, that general licence has not been granted. Instead the US has granted licences on a case-by-case basis. However, the Yogi, Timon, Rantanplan and Bigli could set a precedent for other sales.