What Does the Qatar Embargo Mean for Shipping?

Four Arab nations have recently cut trading ties and diplomatic relations with Qatar. This crisis has resulted in several confirmed and unconfirmed restrictions that will impact on shipping trades. Port authorities in Saudi Arabia and the United Arab Emirates (UAE) have banned Qatari flagged or owned vessels, as well as vessels that are destined for or arriving from Qatari ports. Bahraini authorities have closed their territorial waters for navigation to and from Qatar and Qatari vessels are not allowed entry into Abu Dhabi petroleum ports. The same countries have closed their airspace for flights to and from Qatar. In addition, Saudi Arabia have closed their land border and some banks in the region are allegedly refusing to carry out transactions with Qatari banks.

Egypt's position remains unclear. Whilst the country has imposed restrictions on flights to and from Qatar, neither its port authorities nor the Suez Canal authority have issued bans for vessels carrying Qatar sourced cargoes or for vessels otherwise linked to Qatar. A Norwegian flagged LNG carrier carrying a cargo loaded in Ras Laffan was reported to successfully have transited the Suez Canal at the end of last week, whilst two other Qatari controlled LNG carriers that were headed to Europe with LNG cargoes reportedly diverted course before reaching the southern point of the canal. A ban by the Suez Canal authorities would be of particular concern given its role as a key shipping route.

LNG owners and operators are not the only parties that are likely to be affected by the diplomatic crisis. Many foreign flagged offshore support vessels are employed in Qatar with their owners commonly managing crewing and operational services from bases in the UAE. The UAE's ban is also significant from a bunkering perspective, with Fujairah being one of the world's bunkering hubs. Ships trading with Qatar may therefore be forced to take bunkers elsewhere, although the last latest circular from the UAE Federal Transport Authority indicates that non-Qatari flagged or owned vessels may be able to bunker in Fujairah even if they are trading to and from Qatar. Qatar is also a significant exporter of condensate, ultra-light crude oil. The current situation is likely to complicate matters for owners and charterers of crude carriers that regularly call at Qatar, as well as for traders dealing in the sale and purchase of Qatari sourced condensate.

A number of other operational issues are also expected to arise, with crew changes and the taking on of stores and spares having to be rearranged.

From a legal perspective the current situation is likely to result in charter disputes, renegotiations and potential terminations. Owners and charterers are urged to evaluate trading limits in their charters, force majeure clauses, as well as safe port and deviation provisions. Insurance positions should also be verified.

The diplomatic standoff continues and the list of countries imposing bans on relations with Qatar is growing, with Yemen and Libya being the latest countries to have severed their diplomatic ties with the country. Whilst it is clear that the restrictions on Qatari flagged vessels will have immediate practical implications for owners and charterers trading in the region, the longer term implications are not yet clear. We expect to have more clarity as the situation unfolds and will issue further updates in due course.

Chris Grieveson is a partner at Wikborg Rein's London office and is an English Solicitor. He is part of the firm's Shipping Offshore practice. Chris specializes in shipping, oil & gas, and commodity trading law. He has extensive experience of all aspects of shipping law. He has been involved in handling some of the world’s largest casualties and pollution incidents.

Mads Ødeskaug is a Trainee Solicitor at Wikborg Rein's London office.