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Iran Sanctions Tighten as OSG to Frontline Halt Crude Cargo

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Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries‘ second-largest producer.

OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.

Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.

“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”

Kharg Island

OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.

Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.

Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.

Nova Tankers

“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”

Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.

Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.

Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.

Tighter Restrictions

U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.

The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.

Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.

Senate Bill

More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.

While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.

Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.

Marshall Islands

Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.

Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.

“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”

–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.

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Attempts to Bypass the Dollar

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The US has dominated trade for nearly a century. That is coming to an end as its manufacturing sector continues to shrink. Yet the dollar continues to be the world currency, providing numerous advantages for the US that other countries resent.

The US is looked at as a declining power, hopelessly in debt. It is able, through the dollar, to export inflation to other countries.

The world views the US as fiscally and monetarily out of control and unwilling to make the proper, hard economic decisions. There is fear that continuance with the dollar risks massive inflation throughout the world and/or a collapse of  the world’s only international currency.

Fortunately for the US, there is no other fiat currency capable of replacing the dollar — at least now.  The Euro was a hope for awhile, but now it is apparent that the Euro will not survive much longer. The motives for finding an alternative to dollars is strong because the risks (and advantages) are so great.

One approach would be to create an international currency consisting of a basket of other currencies and/or commodities. How likely it is that one could be developed is moot. Suffice to say that there is strong motives on the part of many other countries to come up with such an alternative.

An important article on stirrings in the anti-US dollar and perhaps the beginnings to displace the dollar by Chris Blasi is presented below:

Sovereigns Declare War on U.S. Dollar

BY CHRIS BLASI01/24/2012

Profoundly significant news came out of the Middle East on Monday January 23, 2012. The headline via DEBKAfile* reads:

India to Pay Gold Instead of Dollars for Iranian Oil. Oil and Gold Markets Stunned

Within the body of the report were gleaned these crucial items:

  1. India has become the first buyer of Iranian oil to agree to settle purchases in gold.
  2. China is expected to follow India’s move.
  3. Approximately 40% of Iran’s total oil exports are consumed by India and China.
  4. Settling oil transactions in gold enables Tehran to circumvent the EU’s upcoming freeze on Iran’s Central Bank assets and the oil embargo announced Monday January 23rd.
  5. Due to the magnitude of the transactions proposed, the price of gold is expected to rise and the Dollar’s value depressed on world markets.
  6. The EU currently accounts for approximately 20% of Iran’s oil exports.
  7. The transactions are to be facilitated via two Indian state owned banks and a Turkish state owned bank.
  8. Financial mechanisms have also been implemented between Iran and Russia for the settlement of oil purchases in currencies other than the US Dollar.

Iranian Crisis Evolving into Dollar Hegemony and Western Power Challenge

At this point in time it is unnecessary to rehash the dismal state of fiscal and monetary affairs that plague the US. Excluding the willfully delusional, it is clear to any honest analyst that the gargantuan debts of the US can never be paid in full with dollars retaining current purchasing power. Further, with the insatiable need to issue exponentially growing volumes of debt to keep the welfare/warfare state hobbling along, who would willingly continue to finance such a debacle? All that’s left to supports this failing fiat experiment is an entrenched, yet deteriorating, reserve currency system to which there has not been a functioning alternative to date.

It is because of this macroeconomic environment, and the policies that gutted a previously productive goods producing economy, that the only tool left for the US to maintain the status quo is to defend at all costs the Dollar’s reserve currency status….and its foundational component the Petro Dollar. This is most likely the motive behind the quickening drumbeat to go to war with Iran. If keeping the world safe from rogue states with nuclear capabilities were the sole motive, than why have North Korea and Pakistan been given a pass?

Unlike the invasion of Iraq, whereby that oil rich nation had no allies come to its aid or at least none with the wherewithal to dare protest in a meaningful way, the Iranian crisis is developing into a far more serious geopolitical happening. Just as most wars are a smokescreen for behind the scenes power plays between the various ruling class, the events unfolding in the Persian Gulf look to be such in spades. What will shock the world when the actions reported above are fully digested is the choosing of sides and the clandestine development of alternative financial mechanisms by those nations previously believed not ready or unable to challenge the Western elites.

Following years of speculation as to the fate of the US Dollar and the lengths to which Western bankers would go to defend the system that serves them so well, could today’s headlines be the proverbial ringing bell? Unfortunately, the actions of most bankrupt and overextended empires is to march its people into a calamitous war. As with all historically recorded futile endeavors in defending the indefensible (i.e. a debt based paper monetary system), the most likely financial survivor will again be gold.

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