Britain Raised the Threat Level to the Highest Possible for Ships Operating in the Gulf
Headlines 12 July 2019 Arabia Day Newsdesk 0
Britain raised the threat level to the highest possible for ships operating in the Gulf as tensions escalate in a region accounting for a third of seaborne petroleum trade.
The UK government designated the region a level-3 risk on Tuesday, a day before British warship HMS Montrose had to stop Iranian vessels from impeding a BP oil tanker as it exited the region, according to a person with knowledge of the matter.
Though Iran’s attempts to block the passage of the British Heritage oil tanker were ultimately thwarted, they highlight a growing trend of disruptions to shipping in the area. Two tankers were sabotaged in the region last month, while four were struck in May. The situation is even more fraught for Britain after Royal Marines helped Gibraltar to seize a supertanker hauling Iranian crude in the Mediterranean Sea. Iran’s Revolutionary Guard Corps warned on Wednesday that it would “reciprocate.”
“Iran will focus on retaliation towards UK assets,” says Olivier Jakob, managing director of consultant Petromatrix. “As far as escalation, I don’t know how far they want to escalate it, but they can do it just to be a nuisance.”
The confrontation between the warship and the Iranian vessels was reported by the British government. Tehran said it didn’t happen.
The British Heritage is registered in the Isle of Man, a British crown dependency, but flies the British flag. There are seven Isle of Man registered ships in or close to the Gulf, according to data compiled by Bloomberg. London-based BP also charters ships to export crude from the region, and will sometimes take tankers on long-term charters.
The Isle of Man Ship Registry confirmed that vessels registered there are currently operating in the Gulf. It said such carriers receive the same protection and support as UK ships, as deemed appropriate by the British government. At least one other ship flying the same flag, the supertanker Pacific Voyager, also got an escort, according to the vessel’s operator, Japan’s Mitsui OSK Lines Ltd.
There are 15 freighters flying the flags of Gibraltar, the Isle of Man and the UK presently in or around the Gulf, according to data compiled by Bloomberg on Thursday. They span a wide mix of different types of merchant vessels from tankers to LNG carriers, container and dry-bulk ships.
“UK-flagged vessels, as well as broader flags of convenience and UK interests, continue to exist in a status of heightened but manageable risk,” Dryad Global, a London-based private intelligence firm advising energy companies, shipowners and commodity traders, said in a note. “It is highly likely that this latest incident will provide further impetus for a coordinated international response to provide naval escorts to vessels within the region.”
The growing perils for vessels in the region has been seen most clearly in the cost of insuring tankers. Premiums for the ships and their cargoes sailing to and from the Gulf soared more than tenfold late-last month, although it’s still unclear what impact the latest confrontation will have.
The hike came not long after the Joint War Committee, a group that advises insurers, designated the entire Persian Gulf and waters just outside it a so-called Listed Area – the riskiest possible classification. The assessment gives underwriters room to charge more.
Shipping groups have also been ramping up guidance to their members. Crews should be on alert for any approaches toward a ship, while also using spotlights and sonar equipment to deter approaching divers, according to the Oil Companies International Marine Forum.
Last week, five groups jointly issued a statement advising owners not to use private armed guards, as that may exacerbate already high levels of tension. Using force against possible threats in the Gulf of Oman could escalate the situation and endanger ships and their crews, the groups said.
“There is a greater risk shipping from the Gulf, but this risk has been lingering around for quite a few months now,” says Warren Patterson, head of commodities strategy at ING Bank NV. “Obviously the latest action does little to calm those concerns.”
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