US Weighs Easing Sanctions on Shadow Fleet Amid Record Freight Rates

The Trump administration is considering easing sanctions on so-called shadow fleet vessels linked to Russia, Iran and Venezuela, with the aim of freeing up shipping capacity and bringing down freight rates that have reached record levels. According to a US official cited by Reuters, the measure is aimed at boosting the flow of crude oil and refined products from the Persian Gulf.

The mechanism under discussion would allow previously sanctioned vessels to carry oil and refined products deemed 'legal,' meaning not subject to US sanctions, thereby excluding Russian and Iranian crude, which remain under restrictions. Companies wishing to use these vessels would need to seek authorization from the Treasury Department. Energy Secretary Chris Wright mentioned the possibility in a video address to the World Petroleum Congress in Riyadh, and the Department of Energy clarified that any easing would not facilitate the transport of Russian oil or refined products.

The discussion comes days after Trump temporarily lifted sanctions on Russian diesel exports until April 7, 2027, a decision that drew criticism from Ukrainian President Volodymyr Zelensky, several European countries and US Republican senators. Energy prices also represent a domestic political concern for the administration ahead of the November 3 midterm elections.

Following the news, oil prices fell sharply: Brent dropped 1.5% to $104.49 per barrel, while West Texas Intermediate fell 1% to $94.14. In Asia, tanker shipping stocks suffered steep declines: COSCO Shipping Energy plunged more than 13% in Hong Kong, while China Merchants Energy Shipping, COSCO Shipping Energy's Shanghai-listed shares, and China Merchants Nanjing Tanker hit their 10% daily limit-down on mainland Chinese markets.

Analysts consulted expressed skepticism about the measure's real effectiveness. Scandinavian bank SEB noted that any additional capacity would be limited, since most sanctioned vessels are old and already operating in the market. Clarksons Research estimates there are 1,010 individually sanctioned tankers, totaling 121 million deadweight tonnes and representing 17% of the global fleet's capacity. Consultancy Energy Aspects agreed that the easing would not have a major impact on freight rates, though it could free up a small number of additional vessels for transshipment routes through the Strait of Hormuz. Analysts also warned that European Union and UK sanctions would remain in place, limiting any return of these vessels to conventional trade.