STS and Sanctions in the waters off Singapore, Malaysia, and Indonesia

The waters off Singapore, Malaysia and Indonesia are frequently used by vessels for the transfer of crude oil and petroleum products by ship to ship transfer (STS). This activity supports the bunker trading and supply business conducted in the area. The main areas for such STS operations are:-

• Singapore Western Approaches outside port limits proximate to the port of Tanjung Pelepas;
• Singapore Eastern Approaches outside port limits proximate to the Johore Shoal Buoy and the entrance to the Johore Strait;
• Batam, Indonesia – outside port limits;
• Karimun, Indonesia – outside port limits; and
• Labuan, East Malaysia – outside port limits

This list is not exhaustive and other areas may also be utilised.

Generally the products used are sourced from countries which are not the subject of sanctions, however there have been instances where the base products are from countries such as Iran and Syria (which are the subject of ongoing sanction restrictions) on vessels which are themselves owned or operated by sanctioned entities/companies.

Where the trading, carriage, storage and blending of such commodities may not in itself be in breach of international sanctions, or sanctions applicable under a vessel’s flag state legislation, it should be noted that as a consequence of the sanctions imposed by the US and EU, P&I Clubs in the International Group of P&I clubs are prohibited from providing liability insurance for vessels involved in the carriage, storage or movement of commodities from sanctioned entities.

As such should an owner whose vessels are entered with an International Group club participate in such trades it will result in a withdrawal of cover .

It is therefore considered prudent that an owner whose vessels are entered or reinsured with an International Group club and which are involved in such STS operations in the areas described to take steps to ensure that proper procedures are in place to ensure they do not engage in a trade which may be subject to sanctions.

Such procedures should include but not be limited to:-

• Identifying all parties involved in the supply chain and checking their identities against the lists of designated nationals maintained by the United Nations, Flag State , USA and EU.
• Verifying and obtaining warranties as to the origin and end user of the cargo;
• Verifying the prior movements of the mother and / or supply vessel before any STS operations are commended;
• Exercising caution when negotiating charter party terms and making full use of protective clauses (such as that available from BIMCO);
• Ensuring that procedures are properly put in place and put into practice in all departments – chartering, operations and on board the vessel itself.

Should you have any queries in relation to this article please contact Mark Robinson or Mark Church at North.