Teekay’s Yamal LNG activities hit by OFAC’s COSCO sanctions

The Teekay Group has postponed an investor and analyst meeting set for tomorrow in order to ‘fully focus on avoiding undue disruption to Teekay LNG’s business from certain complex issues that have recently emerged.”

Those “complex issues” are the impact of OFAC sanctions imposed September 25 imposed sanctions on two subsidiaries of leading Chinese state-owned shipping and logistics company COSCO, including COSCO Shipping Tanker (Dalian) Co., Ltd. (COSCO Dalian), for trading oil with Iran with their owned vessels

COSCO Dalian is a direct 50% shareholder in China LNG Shipping (Holdings) Limited (CLNG).

CLNG, owns a 50% interest in Teekay LNG’s Yamal LNG joint venture Yama which owns four on-the-water ARC7 LNG carriers and two ARC7 LNG carrier newbuildings.

According to Teekay, “CLNG was not listed on the recent OFAC Order or otherwise directly implicated in any sanctioned activity, but by virtue of being 50%-owned by COSCO Dalian, CLNG currently qualifies as a ‘Blocked Person’ under OFAC rules.”

Teekay says that, “as a result of CLNG’s 50% interest, the Yamal LNG Joint Venture also currently qualifies as a ‘Blocked Person’ under OFAC rules.”

Teekay says it has been advised by CLNG that it is “actively engaged in seeking a prompt resolution to this issue.”

The Teekay Group says that it has not traded and will not trade with Iran and will not act in contravention of any trading sanctions.

With respect to Teekay Tankers’ business, given the significant size of COSCO Dalian’s tanker fleet, these same COSCO sanctions are having a pronounced positive impact on spot tanker rates.

How far do the COSCO Sanctions go?

The U.S. Treasury issued this clarification September 25

Do sanctions on COSCO Shipping Tanker (Dalian) Co. and COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. apply to their corporate parent and affiliates?

COSCO Shipping Tanker (Dalian) Co. and COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. were determined by the Secretary of State on September 25, 2019, to meet the criteria for the imposition of sanctions under Executive Order (E.O.) 13846, and the Secretary of State imposed certain sanctions, including blocking, on these entities. The blocking sanctions apply only to these listed entities and any entities in which they own, individually or in the aggregate, a 50 percent or greater interest. Sanctions do not apply to these entities’ ultimate parent, COSCO Shipping Corporation Ltd. (COSCO). Similarly, sanctions do not apply to COSCO’s other subsidiaries or affiliates (e.g., COSCO Shipping Holdings), provided that such entities are not owned 50 percent or more in the aggregate by one or more blocked persons. U.S. persons, therefore, are not prohibited from dealing with COSCO, its non-blocked subsidiaries, or non-blocked affiliates to the extent the proposed dealings do not involve any blocked person, or any other activities prohibited pursuant to any OFAC sanctions authorities. Similarly, non-U.S. persons do not face sanctions risk for engaging in transactions with COSCO, its non-blocked subsidiaries, or non-blocked affiliates. [09-25-2019]