US weighs lifting sanctions on Iran's 'shadow fleet' to address surging costs

The US is considering lifting sanctions on “shadow fleet” tankers tied to Russia and Iran to address soaring diesel prices ahead of midterm elections, according to multiple reports and a senior US official. US Energy Secretary Chris Wright said in a video address to an energy forum in Riyadh this week that the Trump administration was discussing easing sanctions on shadow fleet vessels to address record freight rates that have driven up costs of shipping American energy abroad, Energy Aspects, a research group, said.

The Financial Times reported on Thursday that the US could allow the sale of blacklisted vessels to non-sanctioned operators and lift sanctions, allowing them to operate without restrictions. Reuters reported the US could allow “legal oil" to flow on previously sanctioned vessels, effectively allowing sanctioned ships to carry crude or petroleum products not sanctioned by the US. Iran’s shadow fleet rose in full force in 2018, after the US unilaterally withdrew from a nuclear agreement with Iran and global powers, officially titled the Joint Comprehensive Plan of Action.

The US imposed debilitating sanctions on Iran and has honed in on its oil industry. New MEE newsletter: Jerusalem Dispatch Sign up to get the latest insights and analysis on Israel-Palestine, alongside Turkey Unpacked and other MEE newsletters Energy Aspects estimates that around 15 percent of the world's tanker fleet is under US sanctions. The Trump administration’s move comes amid soaring tanker rates that drive up fuel costs and make it cost-prohibitive for the US to sell its own energy to China and Europe.

Diesel prices in the US are up almost 16 percent in the last month alone. By wresting control of the Strait of Hormuz, Iran has turned the tables on US Read More » Gibson Shipbrokers said earlier this month that it now costs more to send a tanker from the US to China than to launch a rocket into space. Launching a SpaceX Falcon 9 rocket costs $74m, while sending a Very Large Crude Carrier from the US Gulf coast to the Far East costs $80m.

Tanker rates have soared as a result of the US-Israeli war on Iran. The conflict has caused a massive supply-demand imbalance. Gulf states are shipping more oil and refined products out than they were when the war started, but they rely on shuttle services to move product from the Strait of Hormuz onto other ships to avoid Iranian strikes. Tankers also had to take more circuitous journeys around the Cape of Good Hope to avoid Houthi attacks in the Red Sea.

The Trump administration has been increasing sanctions on Iran amid the war, as the ceasefire withers and fighting flares for control of the Strait of Hormuz. Just this week, Washington rolled out economic penalties on 16 individuals and 10 entities in Iran. But the sanctions against Iranian oil sales have come amid rising prices, and Washington is trying to address the surge. Trump’s solution has been to lift sanctions on Russia. Last week, the US lifted sanctions on Russian diesel fuel.

That move has sparked a diplomatic crisis with Ukraine. Copyright © 2014 - 2026 . Middle East Eye. All rights reserved. Only England and Wales jurisdiction apply in all legal matters. Middle East Eye ISSN 2634-2456