The recent developments see OFAC, the US Office of Foreign Assets Control, imposing sanctions on COSCO tankers and certain entities and individuals for transferring Iranian oil, which is against the US rules. Thus, OFAC has further explained who these sanctions impact and how the shipping industry is affected.
- In September, OFAC sanctioned COSCO Shipping Tanker (Dalian) Co. Ltd. (COSCO Dalian), Kunlun Shipping Company Ltd for transporting Iranian oil.
- The tanker costs of oil tankers increased following the sanctions.
- Teekay Group is affected from the US sanctions to COSCO, as CLNG (50% owned by sanctioned COSCO) owns a 50% in Teekay LNG’s Yamal LNG joint venture (the Yamal LNG Joint Venture). As a result of CLNG’s 50% interest, the Yamal LNG Joint Venture also qualifies as a “Blocked Person” under OFAC rules.
- One third of COSCO tankers have reportedly turned their AIS off.
In light of the developments stated above, OFAC explains who is affected from the US sanctions; In essence:
#1 The sanctions apply to COSCO Shipping Tanker (Dalian) Co. Ltd. (COSCO Dalian), Kunlun Shipping Company Ltd., and any entities in which they own, individually or in the aggregate, a 50% or greater interest.
#2 Sanctions do not affect these entities’ parent, COSCO Shipping Corporation Ltd. (COSCO).
#3 Sanctions do not apply to COSCO’s other subsidiaries or affiliates (e.g., COSCO Shipping Holdings), provided that such entities are not owned 50% or more in the aggregate by one or more blocked persons.
Therefore, the Swedish Club adds that the sanctions apply to US persons (US companies and citizens) and foreign entities owned or controlled by US persons, who must “block” the property of these sanctioned entities, and must refrain from directly or indirectly engaging in transactions with the sanctioned entities.
Additionally, the sanctions do not apply to non-U.S. persons. The Club highlights that
This conclusion is based on the observation that, although non-US persons often are prohibited to engage in significant transactions with SDNs under most U.S. sanction laws, the designations on 25 September appear to have been made pursuant to Section 3 of Executive Order 13846, which at least facially does not provide for designation of non-U.S. entities for providing material support or engaging in significant transactions with such non-Iranian SDNs.
Consequently, non-US persons are free to continue business dealings with these entities that became designated on 25 September on the following conditions:
- There cannot be any otherwise sanctionable activity such as trading in Iran petroleum and petroleum products or dealings with Iranian SDNs, and
- The business dealing cannot involve any U.S. nexus , for instance payment of any sums in US dollars