Global Marketing Systems (GMS), a major ship recycling company, has announced that a recent U.S. government license allowing the recycling of four sanctioned vessels may open up a legal way to retire older ships in the shadow fleet. This move could help reduce safety and environmental risks while strengthening sanctions enforcement.
During a recent webcast by Capital Link Expert Talks, GMS Founder and CEO Dr. Anil Sharma mentioned that the U.S. Treasury's Office of Foreign Assets Control (OFAC) approved the first licensed recycling deal for sanctioned vessels this year after thorough discussions with U.S. officials.
Sharma believes this approval is not just about recycling four ships but sets a precedent for how governments could permanently remove sanctioned vessels from operation through controlled recycling processes.
“This approval goes beyond just four ships,” Sharma explained. “It creates a vital precedent for removing high-risk sanctioned vessels from commerce under strict legal and operational oversight.”
The issue is increasingly important as Western sanctions on oil exports from Russia, Iran, and Venezuela have led to the growth of a large shadow fleet of aging tankers outside traditional shipping markets. Many of these vessels operate in unclear ownership structures, have limited insurance coverage, and questionable maintenance, raising safety and environmental concerns.
According to Sharma, the absence of a legal way to dispose of these vessels has effectively kept many sanctioned ships in operation.
“If an old sanctioned vessel can’t be legally traded, financed, insured, classified, or recycled, then it creates a lingering issue without a solution,” he noted.
He urged that the OFAC license should not be seen as easing sanctions or as a chance to trade sanctioned assets. Rather, he described the licensed recycling as a “terminal action” that ensures vessels are permanently removed from commerce, preventing them from returning to sanctioned activities under new ownership or flags.
The recycling process is quite complicated. Sharma explained that each case involves comprehensive legal checks across various sanctions, regulatory approvals, financial assessments, operational planning, and documentation to prove the vessel has been permanently dismantled.
The company also made significant efforts to clarify ownership structures and payment systems to prevent sanctioned parties from benefiting improperly from recycling proceeds. Sharma acknowledged this will become more difficult as future cases involve increasingly complex ownership models.
He also suggested that a lawful recycling procedure could ultimately enhance sanctions policy by gradually reducing the number of vessels available for illegal trade.
“Sanctions haven’t stopped the trade; they’ve just removed the rules,” Sharma argued, saying that removing older vessels from use will slowly limit capacity for sanctioned commerce.
Environmental risks were another key point of the discussion. Sharma warned that many shadow fleet vessels still operate with minimal oversight and referenced past tanker accidents, as well as the ongoing international efforts to avert a disaster involving Yemen’s deteriorating FSO Safer, to illustrate the risks of allowing aging ships to stay in service indefinitely.
Looking to the future, Sharma mentioned that upcoming recycling approvals will likely need cooperation from multiple jurisdictions, including U.S., EU, and UK sanctions authorities, alongside banks, insurers, classification societies, flag states, and recycling countries.
Although each application will still require individual reviews, Sharma stated that the initial OFAC approval proves a transparent, compliance-focused process is feasible.
“Our focus is entirely on the recycling aspect,” he emphasized. “Let’s ensure visibility and transparency. We need a system that can audit this process effectively.”
The full webcast can be viewed here.