Global ship recycler Global Marketing Systems (GMS) says a recent U.S. government license authorizing the recycling of four sanctioned vessels could provide a long-sought legal pathway for retiring aging ships operating in the so-called shadow fleet, potentially reducing safety and environmental risks while reinforcing sanctions enforcement.
Speaking during a recent Capital Link Expert Talks webcastGMS Founder and CEO Dr. Anil Sharma said the U.S. Treasury’s Office of Foreign Assets Control (OFAC) approved the first licensed recycling transaction involving sanctioned vessels earlier this year after months of discussions with U.S. authorities.
According to Sharma, the approval represents more than a one-off transaction involving four container ships. Instead, he argues it establishes a precedent for how governments could permanently remove sanctioned vessels from service through tightly controlled, case-by-case recycling transactions.
“The significance of the approval is not limited to the recycling of four ships,” Sharma said. “It creates an important precedent for how high-risk sanctioned vessels can be permanently removed from commerce under strict legal, financial and operational controls.”
The issue has become increasingly relevant as Western sanctions on Russian, Iranian and Venezuelan oil exports have fueled the growth of a vast shadow fleet of aging tankers operating outside mainstream shipping markets. Many of these vessels sail with opaque ownership structures, limited insurance and questionable maintenance, raising concerns among regulators and industry groups about navigational safety and the risk of a major pollution incident.
Sharma said the lack of a legal disposal mechanism has effectively trapped many sanctioned ships in service.
“If an old sanctioned vessel cannot trade legally, cannot be financed legally, cannot be insured properly, cannot be classed properly, and cannot be recycled legally, then the industry has created a floating problem with no exit,” he said.
He stressed that the OFAC license should not be viewed as a relaxation of sanctions or a commercial opportunity to trade sanctioned assets. Instead, he described licensed recycling as a “terminal action” that permanently removes vessels from commerce, preventing them from returning to sanctioned trades under new ownership or flags.
The process itself remains highly complex. According to Sharma, each transaction requires extensive legal reviews across multiple sanctions regimes, regulatory approvals, financial scrutiny, operational planning and documentation demonstrating that the vessel has been permanently dismantled.
The company also worked extensively to document ownership structures and payment flows to ensure sanctioned parties could not improperly benefit from recycling proceeds, an issue Sharma acknowledged will become more challenging as future cases involve more complex ownership arrangements.
Sharma also argued that establishing a lawful recycling pathway could strengthen sanctions policy rather than weaken it by steadily shrinking the fleet available to conduct illicit trade.
“Sanctions did not eliminate the trade. They eliminated the rules,” Sharma said, arguing that removing aging vessels from circulation would gradually reduce the capacity available for sanctioned commerce.
Environmental risk was another central theme of the discussion. Sharma warned that many shadow fleet vessels continue operating with limited oversight and cited historical tanker accidents, as well as the international effort to prevent a disaster involving Yemen’s decaying FSO Saferas examples of the potential costs of allowing aging ships to remain in service indefinitely.
Looking ahead, Sharma said future recycling approvals will likely require coordination among multiple jurisdictions, including U.S., European Union and U.K. sanctions authorities, as well as banks, insurers, classification societies, flag states and recycling nations.
While each application would still require individual regulatory review, Sharma said the initial OFAC approval demonstrates that a transparent, compliance-driven process is possible.
“Our focus is entirely on the recycling component,” he said. “Let’s create visibility and transparency. Let’s create a regime that is able to audit how this works.”
The full webcast can be viewed here.
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