In the Strait of Hormuz, the Islamic Revolutionary Guard Corps (IRGC) seized a British tanker in what appears to be a retaliation for the seizure of the Iranian tanker by United Kingdom naval forces off the coast of Gibraltar.
Prime Minister Theresa May believes that the seizure of the tanker was illegal, while Iran claims it seized the vessel because it did not abide by International Maritime Laws.
Oil prices jumped due in response to the seizure amid ongoing threats between Iran, the United Kingdom, and the United States. Tensions are high in the Persian Gulf, and the U.K. believes its right to passage has been impeded by Iran and the IRGC. The U.K. is attempting to communicate with its allies to coordinate safe passage for various tanks and vessels in the Persian Gulf and Strait of Hormuz.
Zhuhai Zhenrong Sanctions
The United States has sanctioned a Chinese state-backed oil company for its involvement in Iranian crude oil imports and exports. The United States wants to bring Iran’s oil exports to zero, and it has consistently threatened any company or entity importing Iranian crude oil with sanctions.
Zhuhai Zhenrong, the Chinese company, has had ongoing business relations with entities involved with the exportation of Iranian crude oil to China. Along with the Zhuhai Zhenrong Company, limits on an individual named Youmin Li were also sanctioned. This individual likely was involved in the exportation of oil to Zhuhai Zhenrong. China has taken about twelve million tons of Iranian crude oil this year, and the United States believes this is in violation of its laws.
Any company that is importing significant amounts of Iranian crude oil internationally may risk being designated or sanctioned by the United States and OFAC. Companies should be aware of this risk and take appropriate measures to ensure sanctions compliance.
Impact of the Recent Oil Tanker Seizure
This event may affect the sanctions regime that the United Kingdom and the EU have on Iran. It may also increase the likelihood of the U.S. next sanctions on certain vessels and entities associated with the seizure of the tanker.