Iran Sanctions Tighten as OSG to Frontline Halt Crude Cargo

Iran Sanctions Tighten as OSG to Frontline Halt Crude Cargo

Sanctions on Iran are tightening
after Overseas Shipholding Group, Frontline Ltd. and owners
controlling more than 100 supertankers said they would stop
loading cargoes from the Organization of Petroleum Exporting
Countries’ second-largest producer.
OSG, based in New York, said Feb. 10 that the pool of 45
supertankers from seven owners in which its carriers trade will
no longer go to Iran. Four OSG-owned ships, managed by Tankers
International LLC, called at the country’s biggest crude-export
terminal in the past year, ship-tracking data compiled by
Bg show. Nova Tankers A/S and Frontline, with a combined
93 vessels, said Feb. 9 and 11 they won’t ship Iranian crude.
Previous efforts to curb Iran’s oil income and stop it from
developing nuclear weapons failed because the structure of the
shipping industry means vessels are often managed by companies
outside the U.S. or European Union. An EU embargo on Iranian oil
agreed to Jan. 23 extended the ban to ship insurance. With about
95 percent of the tanker fleet insured under rules governed by
European law, there are fewer vessels able to load in Iran.
“It’s the insurance that’s completed the ban on trading
with Iran,” said Per Mansson, a shipbroker for 31 years and the
managing director of Norocean Stockholm AB, which handles tanker
charters. “Last summer, many countries started to be a little
bit tougher, but the insurance is the real trigger.”

Kharg Island

OSG’s Overseas Rosalyn, which can carry about 2 million
barrels, arrived at Kharg Island on Jan. 27 and departed the
next day, tracking data compiled by Bg show. It left
about 16 feet deeper in the water, an indication it loaded
cargo. The vessel is managed by Tankers International, which has
its head office in Cyprus. OSG complies with all U.S. and
European laws and its head office in New York doesn’t manage
charters, OSG Chief Executive Officer Morten Arntzen said in an
e-mail Jan. 30.
Tankers International told owners the pool’s vessels will
no longer sail to Iran after changes to EU regulations, Arntzen
said in a Feb. 10 e-mail. Insurers are no longer able to cover
vessels trading in the Persian Gulf nation, he wrote.
Ship owners sometimes group their vessels to coordinate
charters and improve earnings. The Tankers International pool
operates 45 very large crude carriers, or VLCCs, from OSG and
six other companies, including Antwerp-based Euronav NV and St.
Helier, Channel Islands-based DHT Holdings Inc.

Nova Tankers

“All the owners in the pool have stated that they will not
trade Iran because of the consequences,” DHT CEO Svein Moxnes
Harfjeld said by phone Feb. 10. “DHT is complying with all
relevant regulations and sanctions and following recent
developments our vessels have been instructed not to trade
Iran.”
Frontline companies including Hamilton, Bermuda-based
Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens
Martin Jensen, chief executive officer of Frontline Management
AS, said by e-mail and phone on Feb. 11 and 12. Frontline
operates 43 VLCCs, according to its website.
Nova Tankers, the Copenhagen-based operator of a pool of
ships, including vessels owned by Mitsui O.S.K. Lines Ltd.,
won’t load Iranian crude because of European sanctions, Managing
Director Morten Pilnov said by phone from Singapore on Feb. 9.
The pool will have about 50 vessels by the end of this year,
according to data on its website.
Nippon Yusen K.K., the second-largest owner of VLCCs, won’t
carry Iranian oil if it means ships aren’t insured, Yuji Isoda,
an investor relations manager for the Tokyo-based company, said
Feb. 9. The company doesn’t yet know how its insurers will
handle the EU sanctions, he said by phone.

Tighter Restrictions

U.S. and EU leaders are trying to tighten restrictions on
business with Iran, which produced 3.55 million barrels of crude
a day in January, 11 percent of OPEC’s total, according to data
compiled by Bg. Oil sales earned Iran $73 billion in
2010, accounting for about 50 percent of government revenue and
80 percent of exports, the U.S. Energy Department estimates.
The United Nations has imposed four sets of sanctions on
Iran and the International Atomic Energy Agency said in November
the country has studied how to make an atomic bomb. The
government in Tehran says its nuclear program is for civilian
purposes and that documents held by the IAEA purporting to show
designs and tests of weapon components are fakes.
Iran has threatened to block shipments through the Strait
of Hormuz in the Persian Gulf, through which about 20 percent of
the world’s globally traded oil passes. Crude futures in New
York advanced 32 percent to $99.66 a barrel since Oct. 4.

Senate Bill

More trade with Iran may be blocked if a U.S. Senate
Banking Committee bill approved Feb. 2 becomes law, making U.S.
companies responsible for the actions of their foreign units
when dealing with Iran. A spokesman for committee chairman Tim
Johnson, a South Dakota Democrat, declined to comment.
While the Japanese government said last month it would curb
imports from Iran, India’s Foreign Secretary Ranjan Mathai said
Jan. 17 his country won’t. China, the Persian Gulf country’s
largest customer, needs the oil for development, Vice Foreign
Minister Zhai Jun told reporters Jan. 11.
Founded in 1948, OSG has 111 vessels and 3,500 employees,
according to its website. Its biggest shareholders include the
family of board members Oudi and Ariel Recanati, who control
about 10 percent, data compiled by Bg show. Oudi Recanati
is an Israeli citizen and Ariel Recanati a U.S. citizen,
according to a Sept. 6 filing with the Securities and Exchange
Commission. Charles A. Fribourg sits on the board of OSG and
Continental Grain Co., the data show.

Marshall Islands

Shares of OSG, which has 14 supertankers, fell 70 percent
in the past year as a glut of vessels drove down transport
rates. The company will report a loss of $178.6 million this
year, down from $204.4 million in 2011, according to the median
of five analyst estimates compiled by Bg.
Three other OSG vessels from the Tankers International pool
called at Kharg Island in the past year, data compiled by
Bg show. They fly the Marshall Islands flag, which means
they are registered there for regulatory purposes, according to
data on the website of International Registries Inc. Almost 9
percent of the tanker fleet is flagged in the Marshall Islands,
behind Panama and Liberia, according to data compiled by London-
based Clarkson Plc, the world’s biggest shipbroker.
“Ship owners and brokers are now seeing a tightening of
sanctions,” said Bob Knight, the managing director of tankers
at Clarkson in London. “This is a sign that sanctions are
starting to bite.”