An influential US politician may be behind Overseas Shipholding Group’s decision to withdraw an application for a federal loan guarantee from the US Maritime Administration (Marad).
In a letter sent to the head of the US Department of Transportation two days before the New York-listed tanker owner pulled its bid, House Majority Leader Eric Cantor asked Secretary Ray LaHood to reject the $241.8m request.
“I am particularly disturbed by reports that your department is seriously considering providing loan guarantees to a company that is openly flaunting the sprit- if not the letter- of the United State’s government’s own sanctions policy towards Iran,” the Virginia Republican wrote on 15 February.
(click HERE to read the letter in full)
The message followed a report published by Bloomberg five days prior in which the news service said at least four OSG tankers that trade in the Tankers International Pool called on Kharg Island on at least one occasion over the past year.
One of the vessels, the 317.900-dwt Overseas Rosalyn (built 2003), arrived at the embattled nation’s largest oil terminal on 27 January, four days after the European Union signed off on a phased–in ban on the insurance and transportion of Iranian crude, the article claimed citing ship tracking data.
“While there are merits to the US Maritime Administration’s efforts to promote American shipbuilding, it strikes me as dangerous to reward companies that are doing business with the world’s most active state sponsor of terrorism with hundreds of millions of dollars of taxpayer funds,” Cantor continued.
While the letter singled out OSG and its application, which would have covered debt secured by a pair of Jones Act shuttle tankers, Cantor’s concerns could have a far broader impact on Marad's financing programme and shipowners in the market for loans backed by the US government.
Commenting on the Bloomberg report, Cantor told LaHood: “This news raises significant and troubling concerns about your department’s overall policies.
“I hope you will provide my office and Congress with a detailed explanation about the procedures used by the US Maritime Administration to ensure that US taxpayer funds are not provided to companies engaged in activities that undermine America’s security interests.”
The congressman ordered Marad to provide a list of organisations that are seeking loan guarantees, and concluded by asking: “Are there other companies with pending applications that are doing business- or have done business in the past five years- in Iran or other sanctioned countries such as Syria or North Korea?"
Marad's website identifies American Petroleum Tankers, Pasha Hawaii Shipping and Legacy Leader as the only remaining Title XI applicants but it appears that the list may not be up to date.
(click HERE to read the list in full)
According to a Washington-based spokesmen for the House Majority Leader, congress has not yet received a response from LaHood, the Department of Transportation or Marad but believes feedback is forthcoming.
When pressed about OSG’s dealing with Iran, a spokesman told TradeWinds: “Overseas Shipholding Group is in full compliance with all applicable laws and regulations concerning where and to whom OSG trades its vessels. As these laws and regulations change, OSG will comply with the changes.”
While chief executive Morten Arntzen made a similar statement earlier this month, critics who may be unfamiliar with the limits of US sacntions are begining to question the commentary as OSG has acknowledged its ships call on Iranian ports “from time to time” but stopped short of admitting wrongdoing.
In the ‘risk’ section of a report filed with securities regulators in 2011, the owner said: “From time to time, vessels in OSG’s fleet call on ports located in countries subject to sanctions and embargoes imposed by the US government and countries identified by the US government as state sponsors of terrorism, such as Iran.
“Although these sanctions and embargoes do not prevent OSG’s vessels from making calls to ports in these countries, potential investors could view such port calls negatively, which could adversely affect the company’s reputation and the market for its common stock.”
As TradeWinds has reported, OSG withdrew its Title XI application on Friday following indications from Marad that the bid “would not be approved in the form in which it was submitted”, but failed to elaborate on the government's reasoning.
Going forward, attention will likely turn to why OSG has not officially closed the first tranche of a $211m Title XI bond guarantee, which is secured by two US-flag articulated tug-barges (ATBs), analysts say.
