The Daily View: Pricing risk
THE commercial realities of shipping across large swathes of the market mean that decisions are conducted in minutes, or at best hours.
Windows of opportunity are open for short periods and those increasingly elusive margins tend to be found at the margins of markets and acceptable risk.
Having an appetite for such risk is one thing, but being able to calculate the odds, at speed, is a dangerous game.
And the risk premiums are not what they once were.
This is no longer the chaotic wild west mentality of 2022, where attestations were a licence to print money and certain demographics of tanker owners were gleefully navigating the sanctioned grey zones of the energy markets, safe in the knowledge that nobody would come after them.
Risk premiums now have to be earned by getting dangerously close to sanctions that now bite hard if you are the one caught.
Viewed from a distance you could be forgiven for hardly noticing.
After all, despite various sanctions efforts Iranian crude production and exports remain steady at around 3.2m barrels a day and 1.5m barrels respectively so far this year, with almost all of it destined for China.
But for those unfortunate individuals who do become caught in the cross hairs of sanctions, the experience is very real.
The latest move from the US this week targeted a United Arab Emirates-based businessman and his alleged network of tankers and shipping companies, accusing them of “smuggling Iranian oil disguised as Iraqi oil”.
The cast list of those actors directly involved have been laid bare by the US, but around them there will be networks of middlemen making many “legitimate” operators quite nervous by association.
For every Waleed Khaled Hameed al-Samarra’i there are groups of intermediaries financed by “vanilla” operations getting a cut of the action while having an arm’s length deniability.
That used to be the preserve of larger traders who were meticulous in ensuring that they stayed on the right side of the line. But that model has cascaded down to much smaller, arguably less savvy outfits operating of the edge of sanctions, and in many case beyond.
Having a Dubai-based connection who you can route the occasional transaction through is not the low risk punt it once was.
The reality is, you are likely being watched, even if you don’t know it right now and you have already got away with similar transactions in the past.
How far a quick and cursory “Know your Customer” check would penetrate into that knot of opacity and financial structures designed to protect the middlemen, is the question that every legitimate operator should be asking themselves.
The US Treasury are pretty confident that they know the answer.
Richard Meade
Editor-in-chief, Lloyd’s List
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