US sanctions Chinese vessels: A different method of blockade and power play

By Mark Hoskin Source:Global Times Published: 2019/10/21 22:48:40

Washington sanctions Chinese vessels: A different method of blockade and power play


Illustration: Luo Xuan/GT

Last month, the US Department of the Treasury announced the COSCO Shipping Tanker (Dalian) Company and COSCO Shipping Tanker (Dalian) Seaman and Ship Management Company met the requirements for new sanctions under Executive Order 13846, which reimposed sanctions with respect to Iran. 

US Secretary of State, Mike Pompeo, claimed the Chinese state owned shipping company had knowingly violated US restrictions on handling Iranian oil. The surprise announcement threw global shipping markets into turmoil, raised oil transport prices on the world's oceans, and negatively affected the global community by denying the freedom to engage in trade through the peaceful circulation of legitimate goods.

Yet the US claims to uphold the freedom of the seas as a historic right, based on the Grotian principles of free trade, which involves equitable and peaceful rights to engage in trade and circulate goods. 

Without the ability for customers to utilize US financial exchange systems for US dollar transactions involving COSCO Shipping Tanker (Dalian) Companies, the sanctions result in their owned and operated vessels effectively being blocked from circulating oil, a legitimate commodity on the world market.

While there are many different grades and types of oil produced for the global market, two Western crude oils dominate. The US' WTI and UK's Brent Crude are the benchmarks for purchases of oil worldwide, traded in US dollars. As the global currency for the trade of a major energy source, the US dollar can have a dramatic effect on oil pricing, and the ability of countries to trade in the commodity. 

The US is not a maritime power and holds only a small portion of the world merchant marine fleet. From its highest level at 16.9 percent in 1960 with 2,926 vessels, to approximately 0.4 percent with 182 vessels of the world's merchant vessels operating under the US flag in 2019. 

While the US Navy is the largest naval force globally, its ability to project force under freedom of navigation laws does not affect merchant trade during peacetime, and does not compensate for the miniscule US merchant fleet.

China is a large maritime power, holding the second largest merchant marine fleet behind Greece. With 7,744 vessels as of August 2018, the employment patterns of Chinese flagged or owned vessels in the "carrying trade," when China is not the voyage origin or destination, is significant. 

To find a comparison in US merchant marine history with China's ability to trade globally today, it is necessary to examine the Napoleonic Wars in the early 19th century. Outside of the unnatural trading patterns created by the late 19th century US colonial period, it has now been two centuries since the US occupied the position China holds in merchant marine shipping.

With US inability to circulate goods in the maritime realm, it is in a difficult position, as payment for other nation states to engage in the world's largest national consumer market causes capital outflow. The US has, through governmental domestic policies and those of US merchant shipping companies, been placed in a position where it can no longer be considered a maritime power. 

However, the ability to block the circulation of global currency provides an opportunity to prevent others to operate, as COSCO (Dalian) has discovered. With the company's oil tankers being unable to engage in the world's oil trade through the unilateral actions of the US, a virtual blockade has been implemented, without the use of the US Navy.

Freedom of the seas, the ability to circulate goods around the globe, has been interrupted not through force, merely though the ability of one country to interrupt the flow of financial instruments involved in transactions outside its borders. 

As Hugo Grotius said, people are not to be deprived of sovereignty over their possessions due to political or religious differences, since sovereignty is a matter of positive law. It is possible to look further for advice with "Ubi societas, ibi jus," wherever there is a social structure, you will find law. 

The US attempts to sanction COSCO and prevents to company from circulating goods freely and making use of the wares and products it possesses should be considered in this light. It should not be considered with the words of US Rear Admiral John Hayes, who said in 1962; "It does seem time that the whole idea of freedom of the seas be reviewed by the Nation and the Navy that is alone able to control the seas." 

Denial of a state's ability to enjoy the benefits of maritime power through control of financial transaction services is a naval blockade, and denial of sovereignty via other means, which can be considered as a denial of the right of a maritime power to engage in trade. 

As Grotius stated over a century before the US emerged as a nation, "It does not matter if there any differences based upon religion or political structure, all nations have the right to freely circulate goods upon the seas."

The author is a doctorate researcher at SOAS, University of London.
Newspaper headline: Washington sanctions Chinese vessels: A different method of blockade and power play


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