The recent seizure of an oil supertanker carrying Venezuelan crude by the US Coast Guard on December 10 has sparked renewed interest among ship recyclers at Alang in Gujarat, thousands of nautical miles away. Industry participants believe the move could accelerate the flow of sanctioned vessels from the global “dark fleet” to the world’s largest ship recycling hub as pressure mounts under President Donald Trump’s renewed sanctions regime.
The action is expected to discourage operators of sanctioned oil tankers from continuing risky operations, pushing many to opt for scrapping instead. “Most sanctioned vessels are over 25 years old, and scrapping them makes more sense than operating them under growing regulatory and enforcement risks,” a shipbroker said. A recycler based in Alang added, “It looks like more sanctioned vessels will head to Alang for dismantling in 2026.”
Rising share of sanctioned tonnage
The global dark fleet currently comprises around 1,423 tankers, of which 921 are sanctioned by the US and European countries. Industry estimates suggest that sanctioned vessels could account for more than 40 per cent of Alang’s recycling business in the coming year, up from about 23 per cent so far this year.
Since January, Alang recyclers have beached 118 ships for dismantling, including 16 sanctioned vessels. While sanctioned ships made up a relatively small portion numerically, they accounted for a disproportionately large share of tonnage—about 2,80,872 tonnes out of a total 12,02,005.594 tonnes—reflecting their larger size. One sanctioned vessel of 20,001 tonnes has remained under court arrest and anchored at Alang since June.
Recyclers benefit from US OFAC-sanctioned tankers as these vessels are often available at discounted prices, similar to the discounted Russian crude purchased by Indian refiners in recent years. Reports indicate that some sanctioned very large crude carriers (VLCCs) are being sold for recycling at discounts of up to 20 per cent.
Market distortion and financing challenges
However, the influx of sanctioned tonnage has disrupted the ship recycling market. Many recyclers are reluctant to buy regular, compliant vessels as they struggle to match the prices offered by buyers of sanctioned ships. As a result, an increasing number of recyclers are turning towards sanctioned vessels, despite the complexities involved.
Financing remains a major hurdle. Indian banks have reportedly refused to open letters of credit (LCs) for the purchase of sanctioned ships destined for Alang. To bypass this constraint, recyclers have begun routing payments through Russian banks, which are more willing to open LCs in Indian rupees.
Sberbank and VTB Bank already operate branches in India, while Gazprombank and Alfa Bank—both sanctioned by Western nations—have sought approval to establish operations in the country, according to a Reuters report dated December 4.
With freight rates having remained relatively firm in recent years—encouraging owners to keep ageing ships operational—the US seizure of the Venezuelan tanker could mark a turning point. For Alang recyclers facing limited vessel supply, the development may prove timely, potentially ushering in a new wave of sanctioned ships to India’s ship-breaking yards.
