Seatrade-Maritime: Sanctions clarity needed before Hormuz trade resumes, says LMA

Published by Seatrade-Maritime

A series of practical steps and clarification of sanctions and regulatory issues will be required before ships stuck in the Arabian Gulf can safely transit the Strait of Hormuz again, leaders at Lloyd’s Market Association (LMA) said.

Sheila Cameron, CEO at LMA and Neil Roberts, head of marine and aviation at LMA and committee secretary of its Joint War Committee, published a joint statement welcoming the MoU between Iran and the US, but drew attention to issues in need of addressing before vessels can move freely through the region again.

Taking the organisation’s last point first, it called for clarity around sanctions, terrorism and toll payments. “There must be clear advice and consistency of approach from the UK, EU and US on the extent to which sanctions and designations of Iranian entities have been amended. The MoU refers to shipments of Iranian oil and that there will be no toll payments. However, a greater level of detail will be required before insurers and insureds can be clear as to what trade can safely take place,” said LMA.

The Western powers have a series of overlapping sanctions regimes targeting Iran and its oil sector, designating a list of Iranian banks, ports, shipping companies, and more. Iran is effectively cut off from US dollar banking, bringing increased risks around any payments for freight, insurance, port charges, cargoes and tolls. Shipping companies and their insurers will want full details of any lifted sanctions to avoid potential harsh penalties for sanctions breaches.

The first of LMA’s necessary steps is co-operation between Iran, the US, and other states such as Oman on navigational safety and prioritisation of vessel passage, LMA said. Shipping leaders have warned for some time that a re-opening of the Strait of Hormuz could lead to a dangerous situation if hundreds of vessels rush to the narrow waterway in a short period of time. In May, maritime associations published Industry Guidance on the Safe Management of Vessel Transit through the Strait of Hormuz to warn of potential dangers during such a scenario along with steps to mitigate them.

LMA’s second step is verification of mine clearance. No vessels have been struck by mines during the latest conflict, nor is there conclusive evidence to the presence of mines, but the munitions pose a serious threat to commercial ships. US forces destroyed a fleet of Iranian minelayers in mid-March, but there have been allegations of Iranian minelaying activity since. Security companies have claimed that sweeping the Strait of Hormuz to clear mines or confirm their absence could take 30 – 60 days.

LMA’s third step is clarifying the provision of emergency services for vessels and their crew while in Iranian waters, including restoring the availability of salvage and maritime services. Availability of such services will be particularly important in the early stages of any reopening, as large numbers of vessels may seek to leave the Gulf and crews are more likely to be fatigued.

LMA’s fourth point highlights the need for vessels to be seaworthy prior to attempting to transit the Strait. The insurer association noted reports of issues with stores, fuel, and bottom scraping after vessels have been at anchor for long periods of time. GNSS and navigation systems will also need to be restored, said LMA.

The fifth point addressed ports, asserting that a full reopening of the port infrastructure system would be required for safe cargo loading and unloading operations, including pilotage, berthing, and bunkering.

“The road to recovery in the Gulf will be a long and complicated one. It will take months for some sort of normality to return to international shipping with vessels in the wrong place and supply chains distorted, much in the same way that after a public transport strike it always takes time for complicated, detailed timetables to return to normal.”