Evolving political threat puts shipping at risk

Political risk remains heightened around the globe, and increasingly poses a threat to shipping, trade and supply chains .

According to Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2019, political risk remains heightened around the globe, and increasingly poses a threat to shipping, trade and supply chains through conflicts, territorial disputes, cyber-attacks, sanctions, piracy and even sabotage.
“Political risk is increasing and continues to be a major concern. Territorial disputes, trade tariffs, sanctions and the prevalence of just-in-time manufacturing, pile more and more stress on supply chains,” says Captain Andrew Kinsey, Senior Marine Risk Consultant at AGCS.
The South China Sea, a key commercial shipping route connecting Asia with Europe and Africa, is also a source of tension between nation states, in particular the US and China, which are vying for control of Pacific waters.
China is also in dispute with a number of Asian countries which claim sovereignty over the Spratly Islands.
Such tensions could lead to incidents – in 2017 the USS Fitzgerald collided with a container ship while the USS John S. McCain hit an oil tanker, when they were on patrol in this region.
Political risk is also playing out in the cyber space, as some nation states look to target critical infrastructure, including ports, logistics and shipping.
The 2017 NotPetya contagious malware outbreak, attributed by the US to Russia, crippled IT systems at Maersk, disrupting its port terminals and container operations.
In the same year, some 20 vessels were affected by a GPS spoofing attack in the Black Sea, while similar incidents have also been reported by ships in the Middle East.
“Political rivalries and conflicts are being played out on the seas. Whether it is the global economy, cyber or the environment, this is where borders disappear and where we all have to operate in the same body of water,” says Kinsey.
Conflicts in hot spots like Yemen – where Houthis rebels attacked a Saudi oil tanker in the Red Sea in 2018 – and the Azov Sea and Black Sea – where Russian ships fired on and seized three of Ukraine’s ships in 2018 – continue to fester.
In May 2019, oil tankers were attacked off the coast of the United Arab Emirates, amid rising tensions between the US and Iran.

More accidents and injuries at sea, stockpiling goods and additional pressure on vessels and crew could be just some of the potential knock-on effects from the new political tool of choice.
In January 2019, the US tightened sanctions against Venezuela, targeting the country’s oil industry against a backdrop of growing political unrest in the country.
Unable to sell sanctioned oil, the country’s oil producers were forced to store 8.36 million barrels of Venezuelan crude worth US$500 million in a fleet of tankers moored along the country’s coast.
Sanctions have become the political tool of choice.
The US and EU has a number of wide-ranging sanctions regimes in place that directly target individuals and sectors, including energy, shipping and financial services like banking and insurance.
These include sanctions against Russia and Iran, and most recently Venezuela.
In November 2018, the US re-imposed sanctions on Iran’s shipping and insurance sectors, including the National Iranian Tanker Company.
It warned other countries that allowing Iranian tankers to call at their ports or transit waterways comes at great risk, as under-insured Iranian tankers are engaging in unsafe behavior and would be unable to cover the loss in event of an accident such as an oil spill.
Sanctions can have a direct impact on maritime safety.
The US believes Iranian vessels are disabling location transponders in a bid to evade US sanctions and make it harder to track the country’s oil exports.
However, turning off transponders only increases the risk of accidents and injuries.
“Sanctions can increase exposures as companies are forced to stockpile or store goods in ports and on vessels. There are also considerations for vessels trading in a sanction environment, including additional pressures on the operation of a vessel and the quality and training of crew,” says Kinsey.
With renewed sanctions on insurance, Iranian tankers will also lose access to the international insurance marketplace.
According to the US Department of State, self-insurance and coverage from Iranian insurance companies will only go so far and is unlikely to be sufficient to cover the loss of an oil tanker, where insured values can exceed $1 billion.
On January 6, 2018, the Iranian-owned tanker Sanchi sank after colliding with another vessel in the South China Sea – the majority of the loss was covered by international insurers.

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