Embargo on Qatar Disrupts Bunkering, LNG Shipments

Maran Gas Amphipolis (file image)

Published Jun 8, 2017 9:55 PM by The Maritime Executive

On Thursday, the shipping industry’s concern over the economic sanctions that six Sunni nations have placed on Qatar deepened, and the full extent of the embargo's implications for marine insurance, port access, bunkering and the LNG trade remain unclear. 

In a circular to clients Thursday morning, leading marine insurers Gard detailed the latest restrictions on shipping to and from Qatar. The UAE, Bahrain and Saudi Arabia have all banned Qatari-flagged and Qatari-owned vessels from their ports; the UAE and Bahrain have also banned all vessels going to or from Qatar, regardless of flag. DP World UAE – the operator of Jebel Ali, the largest container facility in the region – has gone further by banning "all ships loading or discharging cargo destined for or coming from Qatar," even if these ships are not traveling to Qatar themselves. 

The UAE's ban is particularly significant because its harbor at Fujairah is the primary bunkering port for the Middle East, and ships trading with Qatar may be forced to alter their operations in order to obtain fuel elsewhere. Platts reports that bunkerers in Singapore are seeing an uptick in demand as vessels are forced to cancel their plans to refuel at Fujairah. "We have seen huge volumes move to Singapore for sure," a supplier in the UAE told Platts. 

International LNG traders have expressed concerns that the diplomatic dispute could have an effect on Qatar's gas exports, the largest source of LNG in the world. The worst-case scenario would be restrictions on Europe-bound Qatari LNG at the Suez Canal, which is administered by Egypt. To date, Gard says, Egyptian and Canal authorities have given no indication that Qatari LNG carriers will have difficulties at the canal. However, Al Jazeera reports that two UK-bound gas carriers – the Al Mafyar and the Zarga – have turned around before reaching the canal and are now headed for unknown destinations.

No information was immediately available regarding the cause of the rerouting, but UK natural gas prices went up by about four percent when the news broke. Fully one third of Britain's natural gas comes from Qatar, a significant exposure to foreign supply that has raised questions in the UK regarding declining domestic production, according to the Guardian. 

The UAE's ban on Qatari shipping extends to Qatari natural gas, and Shell – which has an LNG supply contract with Dubai – has been forced to reroute a vessel with American LNG to substitute for a regular shipment of Qatari gas. The Maran Gas Amphipolis was reportedly expected to deliver 160,000 cubic meters of U.S. LNG to Kuwait, but Shell has rerouted her to an import terminal at Jebel Ali instead because the UAE will not accept Shell’s usual Qatari shipments by sea.

Implications for insurance

In its Thursday circular, Gard warned that shipowners who violate the UAE, Saudi or Bahraini shipping embargo face the possibility of losing their cover for liabilities arising out of “blockade running” or “unlawful . . .  trade or voyage.” Notably, Gard said that vessels may continue to trade to and from Qatar without creating legal questions for their insurers – so long as they do so in a manner that does not violate the embargo. “No reference is made to insurance as far as we can see in the published port circulars. Thus, it is not in itself prohibited to insure a ship trading on Qatar,” Gard wrote.

Diplomatic standoff continues

On the surface, the economic sanctions are a form of retaliation for Qatar's alleged engagement with terrorist organizations Hamas and Hezbollah and its recent rapprochement with Iran. But many analysts suggest that the situation is much more complex, stemming from a frustration among the Sunni Arab nations that Qatar is increasingly forging its own path in regional politics – especially with regards to Tehran. 

Qatari foreign minister Sheikh Mohammed bin Abdulrahman Al Thani said Thursday that his nation has never experienced so much "hostility" from any foreign power, even an enemy, and he said that Qatar would not surrender under pressure. "No one has the right to intervene in our foreign policy . . . We are not ready to surrender, and will never be ready to surrender, the independence of our foreign policy," he said. However, he emphasized that there would never be any form of military option to resolving the crisis.

Turkey and Iran have weighed in to support Doha diplomatically, and Turkey has fast-tracked a measure authorizing the deployment of troops to Qatar – much to the dismay of the UAE. "The great escalation from the confusing and confused brother country [Qatar] and the request for political protection from two non-Arab countries and military protection from one of them could be a new tragic and comic chapter," wrote UAE foreign minister Anwar Gargash in a Twitter post late Thursday. 

A growing number of Saudi-aligned nations have elected to join the diplomatic sanctions, including Jordan, Djibouti, Senegal, Libya and Chad. Saudi Arabia's foreign minister, Adel al-Jubeir, flew to Muscat on Thursday to talk with Omani leaders, according to Saudi state news; so far, Oman has remained neutral in the crisis.

Kuwait and the United States are making efforts to mediate between the parties. On Wednesday night, Kuwaiti leader Sheikh Sabah Al Ahmad Al Sabah flew to Qatar for a hurried meeting with Qatari emir Sheikh Tamim bin Hamad Al Thani, and on Thursday, U.S. President Donald Trump reiterated an offer to Al Thani to host talks on the crisis at the White House. 

Sanctions extend to freedom of speech

On Wednesday, Bahrain announced a ban on "any expression of sympathy with the government of Qatar or opposition to the measures taken by the government of Bahrain." The declaration was aimed at social media posts in particular, but it extends to all forms of publication and communication. Any violation is a criminal offense, punishable by a fine and up to five years' imprisonment. Saudi news outlet Okaz also suggests that online expressions of sympathy with Qatar is a criminal offense, punishable with up to ten years in jail and a fine. On Thursday, the UAE followed suit and issued a more punitive warning, with prison sentences of up to 15 years and fines in excess of $100,000.  

Meanwhile, Qatari news outlet Al Jazeera has reported a sustained campaign of hacking targeting its online news platforms, and it says that the attacks are growing in intensity. The channel also maintains that hackers placed a false news story on the site of the Qatar News Agency last month – a story that Qatar credits with sparking the diplomatic upset.