Qatari Restrictions: What We Know So Far

As the tensions between Qatar and its Middle Eastern neighbors heat up on the back of severing of diplomatic ties on Monday, June 5, the shipping industry is bewildered by the potential impact the move might have on the industry.

Companies with trade routes to and from Qatar are already feeling the effect of the crisis as many had to stop accepting cargo destined for the country, including Maersk Line, OOCL, and Evergreen.

Aside to regional ports shunning Qatari vessels, including those destined or originating from the country, the impact seems to be widening by the day.

The most immediate implications on the shipping sector, as anticipated by the Holman Fenwick Willan LLP law firm, include hampering of the purchase of Qatari crude and condensate, hindering of bunkering operations at major bunkering ports such as Fujairah and transshipment at local ports, along with difficulties related to crew.

“The trade ban may make the purchase of Qatari crude and condensate more difficult. Indeed, very large crude carriers regularly conduct multi-loads of crude at multiple Middle East ports. Barring vessels that have called at Qatar from entering other ports in the region could require traders to vary their trading patterns,” HFW said.

With regard to transshipment, the law firm cited reports saying that cargo is not allowed to be discharged onto feeder vessels to Qatar. In Fujairah, any Qatari cargoes already in port must be cleared within 24 hours.

Responding to the ongoing situation Danish shipping major Maersk Line said it closed bookings for cargo that transship over Jebel Ali to or from Qatar for the time being. Operation at DP World Jebel Ali and Abu Dhabi Terminals have also been affected as they are no longer accepting cargo to/from Qatar ports, including transshipment cargo, until further notice.

What is more, ship managers are said to be encountering difficulties related to crew/personnel.

“For instance, it is reported that the Fujairah port’s immigration is not allowing crews to join or to sign off vessels coming from or bound for Qatar. In parallel, it is proving difficult to extract crew members and other personnel based in Doha given the current blockade,” the law firm said.

On the offshore side, as explained, a number of international operators are bidding for new contracts and renewals to operate their FPSO and FSRU vessels in the various oil fields including Al Shaheen.

“The uncertainly from the events this week will cast a shadow on the underlying charters supporting ship financing,” HFW added.

It has been advised to review charterparties to establish whether they include a provision which specifically addresses blockades.

Furthermore, reports have emerged saying that the banks in the region are likely to refuse to deal with Qatari banks or refuse to recognize the Qatari riyal.

“We understand that some Saudi, UAE and Egyptian banks are suspending business with Qatari banks, such as recognising letters of credit and other contingent payment instruments until they have received guidance from their respective central banks. The international currency of shipping is the US Dollar so we expect limited exposure on this front. However, it may be possible that a shipowner could have an exposure to Qatari riyals if for example, a supply contract requires payment in US Dollars whist the sales contract income for the service or goods is in Qatari riyals,” HFW further stressed.

“Of course, the exposure of businesses to the current Qatari trade restrictions may be covered by insurance. It may also be managed through applicable contractual and local legislative provisions within the Middle East, including those which deal with force majeure and deviation.”

More clarity on the operational and legal implications of the restrictions against Qatar is expected as the matter unfolds. However, there seems to be no indication of the dispute de-escalating.