China - US sanctions COSCO and others

OFAC has placed sanctions on two of COSCO Shipping’s oil tanker operations. (Photo: Shutterstock)

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The US has imposed sanctions on six Chinese tanker companies, citing knowingly engaging in a significant transaction for the transport of oil from Iran, including knowledge of sanctionable conduct, contrary to US sanctions. 

 

This is one of the largest sanctions actions the US has taken against entities and individuals identified as transporting Iranian oil since sanctions were re-imposed in November, 2018, the US State Department said. 

 

The following Chinese firms were listed - China Concord Petroleum, Kunlun Shipping Co, Pegasus 88 and COSCO Shipping Tanker (Dalian) Seaman & Ship Management. 

 

Additional sanctions are being imposed on the following two Chinese companies, which own or control one or more of the four companies identified above, and were alleged to have known about their sanctionable conduct -Kunlun Holding Co and COSCO Shipping Tanker (Dalian). 

 

The State Department also said it was also imposing sanctions on five individuals, who are executive officers of one or more of the six companies identified above - Bin Xu, Yi Li, Yu Hua Mao, Luqian Shen, and Yazhou Xu. 

 

The transaction in question took place after the expiration of China’s Significant Reduction Exception (SRE) on 2nd May, 2019, and was not covered by that SRE. This action targets the specific entities named and does not target their parent companies or any other entities in their corporate groups, the department said.

 

Among other things, the imposition of these sanctions blocks all US property and interests in property of these Chinese entities or within the possession or control of a US person, and provides that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in. The US said it is also imposing restrictions or bans on visas into the country on the five individuals identified above. 

 

Further, the Department of the Treasury will add these entities and individuals to its List of Specially Designated Nationals and Blocked Persons. 

 

“Although this transaction involved the export of Iranian crude oil, we are similarly concerned with the export of refined oil products from Iran,” the State Department said.

 

Initial reaction suggested that charterers and trading houses were ceasing their dealings with tankers controlled or chartered to COSCO.

 

Unipec was believed to have replaced vessels fixed for four oil cargoes from the Middle East Gulf. According to newswires, Unipec, the trading arm of Sinopec, had switched to other tanker owners, including China Merchants owned AMCL.

 

In addition, several oil tankers owned by the COSCO Dalian unit were thought to have had their charters cancelled, while others saw provisional fixtures fall through, according to shipbrokers and charterers, speaking with Bloomberg.

 

According to Bloomberg, oil traders in Asia were cancelling orders with the Chinese tanker companies to avoid being unintentionally dragged into the sanctions. Traders and shippers were also uncertain whether the oil currently being shipped on board any of the sanctioned firms tankers would be allowed to unload or whether the cargo could be transferred to other tankers not affected by the sanctions.

 

In another move, Chinese state shipping giant Cosco Shipping Holdings stopped share trading in its oil transport unit as it tried to contain the fallout. Cosco Shipping Energy Transportation (CSET) said in a filing with the Hong Kong Stock Exchange on Thursday that its shares won’t trade pending an announcement.