Take a Look at This Dirty Picture

Written By Christian DeHaemer

Updated May 15, 2024

Here is a dirty picture showing how the dark fleet avoids the Russian oil sanctions. This has been going on since February.

Dirty Picture

This image was taken from the MarineTraffic blog, and it shows two oil tankers transferring 715,000 barrels of dirty Russian crude oil. Anonymous buyers purchase cheap oil in Russia and then transfer it to a legitimate tanker on the open ocean at which point they can avoid the sanctions and sell it at a higher price.

When the West imposed sanctions on Russia due to its war in Ukraine, it created a dark fleet. These are mostly old ships that in previous years would have gone to the scrapyard. Now, however, oil tanker companies can sell them at huge markups to anonymous buyers.

Obviously, these ships don’t abide by international norms for safety or the environment.

One empty tanker named the Pablo exploded off the coast of Malaysia about two weeks ago. Usually a ship has its empty tanks cleared of explosive vapor after it's been unloaded. It hasn't been confirmed yet, but it is believed that this procedure wasn’t done and that it led to the loss of the ship and killed three sailors.

According to Splash 247, an industry website, the ship was transporting Iranian crude and wasn’t insured.

Iran Takes Tankers

In other news, Iran has detained three oil tankers in the last 19 days. This is a tit-for-tat move because the U.S. has been seizing Iranian tankers in an effort to enforce anti-Iran sanctions due to Iran’s nuclear weapons program.

After the first two tankers were taken, the U.S. Navy put out a strong press release: 

"Iran’s unwarranted, irresponsible, and unlawful seizure and harassment of merchant vessels must stop,” said Vice Adm. Brad Cooper, commander of U.S. Naval Forces Central Command, U.S. 5th Fleet and Combined Maritime Forces. “U.S. 5th Fleet and our partners are committed to protecting navigational rights in these critical waters.”

In 2021, President Biden pulled the last aircraft carrier out of the Persian Gulf, but now the Navy says it is going to ramp up actions. Iran seems willing to take the risk.

Times Are Changing

The U.S. has essentially become energy-independent after fracking unleashed the oil and gas in the Permian Basin.

The Saudis, like a jilted lover, have turned toward China and Russia. The Saudis have said they will transact international trades for oil in currencies other than the dollar. For the past 50 years, the U.S. guaranteed Saudi Arabia's safety in exchange for oil and the petrodollar. That deal is over.

One wonders how much the U.S. cares about the ancient rivalries in the Middle East or keeping the sea lanes open for uninsured Russian oil floating to China. To paraphrase Otto von Bismarck, the Middle East isn’t worth the life of one Marine.

The flip side of this is that legitimate, insured oil tankers are making a killing as the number of tankers available shrinks and they travel farther to get the oil where it needs to go. One company I follow is returning money to shareholders by paying a dividend with a 30% yield. Its net income increased 1,376% last year!

Most of them are buying back shares and paying off debt. Furthermore, due to the increase in the value of their ships, many are trading well below their net asset value (NAV).

And there are plenty of upside catalysts, including China’s economy ramping up, Biden refilling the SPR, and an incident in the Strait of Hormuz. My Launchpad Trader readers are already getting paid and waiting on the next dividend. Join us today.

 All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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