The story so far:
U.S. President Donald Trump has announced a “total and complete blockade of all sanctioned oil tankers going into and out of Venezuela.”
What were the three merchant ships that faced action?
During the week of December 8, the U.S. seized the oil tanker “Skipper” off the coast of Venezuela, carrying nearly two million barrels of crude oil. The U.S. government has indicated it shipped oil at subsidised rates to Cuba, which has been helping the government of Venezuelan President Nicolás Maduro.
Last weekend, the U.S. Coast Guard stopped and boarded Centuries, a Panamanian-flagged tanker carrying Venezuelan oil. The Venezuelan Navy had escorted the ship to the limit of Venezuela’s Exclusive Economic Zone, after which the U.S. Coast Guard stopped it.
During the same day, the Coast Guard attempted to intercept Bella 1, a tanker enroute to pick up crude oil in Venezuela. The U.S. had previously sanctioned the ship for trading Iranian oil.
What are U.S. sanctions?
As a global body, the United Nations can impose international sanctions that are binding and legally enforceable. These can be military, economic, or a combination of both.
On the other hand, U.S. sanctions can be said to be a type of unilateral, inexpensive economic warfare to achieve foreign policy objectives. Physical enforcement of sanctions is costly and often not effective. A physical blockade of ports and ships after the First Gulf War under the Oil for Food Programme for Iraq cost billions of dollars and did not deter Saddam Hussein from trading oil outside the framework.
Since the Second Gulf War, however, the U.S. has sought to use its leverage in the global financial system to enforce sanctions. The U.S. has direct leverage over the dollar, which is the currency of practically all global financial transactions and certainly all oil. The petrodollar is a tool the U.S. wields to enforce its writ.
The U.S. has direct control over its companies and prohibits them from doing business with nations it has sanctioned. Banks and companies headquartered outside the U.S. also comply with these sanctions to continue using the global financial system, which has the U.S. as the hub, and do business in the large U.S. market.
Non-U.S. banks such as HSBC were, for instance, wary of re-entering Iran even after the Barack Obama administration asked them to do so following the nuclear deal. Companies that had cut ties with Iran were fearful since U.S. companies were still forbidden from doing business with Iran.
In 2014, BNP Paribas agreed to pay $9 billion in fines for sanctions violations. To curb North Korea’s nuclear build-up and other activities, the U.S. threatened to keep a small bank in Macau, Banco Delta Asia, through which North Korea was doing business, out of the U.S. system. This was enough to make the bank pull back, which had its intended effect.
Many global financial transactions that do not involve the U.S. still need to be routed through American intermediaries of the primary entities. This gives the U.S. government leverage over those transactions and it can block them.
What other shipping sanctions does the U.S. have in place?
Although ship owning, shipbuilding, repair, and operations are spread across various countries, insurance remains in the hands of Western nations, especially the U.K. Shipping is a high-risk business and insurance coverage of ships is an absolute requirement for importers, exporters, and ports.
Reputed insurance companies with deep pockets provide cover once the ship is certified as safe and seaworthy by a few well-known classification societies, which are typically members of the International Association of Classification Societies (IACS). India’s Indian Register of Shipping is a member of the IACS.
Once the U.S. slaps sanctions, classification societies withdraw their certification and major insurers withdraw their cover. Following Russia’s invasion of Ukraine, Russian ships were held up in the Bosphorus because the protection and indemnity (P&I) club companies that cover liabilities for loss of life and environmental damage withdrew their cover. The ships were too risky to handle for Turkiye. The Black Sea is the most important shipping route for Russian ships in the West.
Following sanctions on ships and shipping companies, some nations that allow ships to register with them may choose to withdraw registration for fear of angering the U.S. Such ships or those that have lost their flag registration can be boarded by navies, as per international law, called the United Nations Convention on the Law of the Sea.
Are U.S. sanctions effective in shipping?
The U.S. has sanctioned companies involved in the trade of Iranian or Russian oil. But Iran is an energy giant and has been able to find alternatives despite losing the cover of big insurers and certification. Russia, too, has been successful to a certain extent in bypassing sanctions that sought to cap the price of Russian oil. The U.S. agency that investigates using its own intelligence service and sanctions individuals and companies that are acting against U.S. foreign policy interests is the Office of Foreign Assets Control (OFAC) of the Treasury Department. It periodically puts out lists of sanctioned individuals and companies.
In June 2024, OFAC sanctioned Bella 1 for allegedly carrying cargo for a Hezbollah-owned company. At that time, the U.S. termed it Panama-registered, but shipping databases now say its flag or nationality is unknown. Ships can be boarded by warships for not flying their flag of registration, on suspicion of piracy, indulging in the slave trade, and so on. After evading the U.S. Coast Guard, Bella 1 has apparently given out distress signals.
Centuries’ registered owner is in Hong Kong. Centuries was once certified by the American Bureau of Shipping, a big classification society and member of the IACS. In July of this year, the relatively smaller Overseas Marine Classification Society, which is not a member of the IACS and has a presence in China and some of the flags of convenience, stepped in to give certification. Centuries is now not listed as having the P&I cover provided by big insurers. Originally Greek-owned, Centuries had called on U.S. ports initially under another name, but after a change of hands has been calling on ports in the Middle America, Africa, China and so on.
Skipper was once owned by the Japanese NYK and later by a Greek company. It changed hands in 2019 to the present owner, which is headquartered in Nigeria. Shipping databases show that it had been classified by IACS members, but the last such certification was withdrawn in 2022. U.S. authorities said it flew the flag of Guyana falsely, which could make it legal for them to detain the vessel as per international law.
The above three ships are examples of what Western nations have dubbed the shadow fleet. They also show how countries such as Russia, Iran, Venezuela, and likely China have been collaborating to break the hold that the U.S. has on global finance and merchant shipping. That the U.S. government had to order a physical blockade in Venezuela would seem to indicate that they have been able to succeed to an extent.
Published – December 25, 2025 10:34 pm IST
