Dubai-based GMS has won U.S. government approval to scrap four container ships that were under Iran-related sanctions, potentially paving the way for Washington to reduce the shadow fleet of such vessels. The company's CEO, Anil Sharma, said these ships are moving from a rule-based regime to a non-rule-based one, creating problems for everyone involved.
The U.S. government has given its approval for Dubai-based GMS to scrap four container ships that were under Iran-related sanctions. This move could help reduce the shadow fleet of such vessels, which have been helping Iran and Russia circumvent sanctions while posing an environmental risk. Hundreds of ships with no known insurance or compliance with environmental safety standards have been contributing to this problem.
GMS buys ships and then disposes of them through regulated recycling yards in Asia, a process that offers an incentive for taking such vessels out of circulation. The company had been in discussions with U.S. authorities for months about taking over ships hit with sanctions. Anil Sharma, GMS's founder and CEO, said these ships are moving from a rule-based regime to a non-rule-based one.
These ships were bought by GMS after receiving permits from the U.S. Treasury, marking its first transaction involving private sellers. The company had previously purchased a North Korean-flagged bulk carrier in 2019, but it was sold at public auction by the U.S. government for recycling.
The U.S. authorities have been cautious about granting 'blanket licences' to companies like GMS, instead requiring them to show money flows and proper reporting to ensure that the proceeds do not end up with sanctioned entities. This approach is aimed at containing trade in sanctioned crude and goods.
The scrap value of such ships typically reaches tens of millions of dollars, depending on the type of vessel and its weight. Two of the four container ships so far had crews and insurance to sail and were likely to be headed to India for recycling.
GMS is also targeting oil tankers hit by sanctions, but this business will only become feasible once the U.S.-Israeli war with Iran ends. The conflict has kept hundreds of ships trapped in the Gulf region, while there was no clarity on how many Iranian-linked commercial vessels have been damaged by U.S. and Israeli strikes.
The tanker market is so hot that most people don't have the incentive to recycle yet. GMS's approach could help reduce the shadow fleet and contain trade in sanctioned goods, ultimately benefiting the environment and global trade.
GMS's win marks a significant step forward in its efforts to tackle the issue of sanctioned vessels. The company's focus on regulated recycling yards in Asia is crucial in ensuring that these ships are disposed of safely and responsibly.
The approved mechanism for scrapping such vessels offers an incentive to take them out of circulation, reducing environmental risks.
