DONALD Trump’s ultimatum to Vladimir Putin, that he should end the war in Ukraine or face a Russian edition of his “maximum pressure” approach to sanctions, has predictably passed without action.

Instead of crippling sanctions we have a summit on the horizon.

The prospect of more or fewer sanctions at this point, while not immaterial to shipping, is to some extent water of the proverbial duck’s back.

The growing list of sanctioned entities and their associated restrictions have created an evolving new global economy drawn down geopolitical lines. The ultimate beneficial owners of assets (rather than their brass-plated fronts) ultimately have to choose sides, or risk expensive consequences.

Some of those outcomes are entirely predictable and intended, at least on the part of those doing the sanctioning. But the further we go down the road of redrawing trade lanes down political lines, the more we see the cracks emerging in the established rules-based order and the unintended consequences bubbling up.

The example of Chinese leasing houses being blindsided by the escalating US sanctions war against Iran, is just the latest example.

Of course, compliance checks were done, but risks have emerged all the same and they have exacerbated the existing shifts in the market that had already unsettled the leasing houses’ established position as the go to source of finance for shipping.

In recent years, tighter regulatory oversight from Beijing, improved shipowner balance sheets, high interest rates, fiercer competition among peers and geopolitical headwinds have slowed their growth — particularly in deals with Western owners.

Some observers see this sanction episode as a byproduct of growth pressures pushing lessors toward riskier, smaller clients. Others say that broadening the client base is a normal part of business development and this case is simply an isolated incident that could happen to any financier.

Regardless, the latest sanctions risks have caused significant ripples across China’s ship leasing sector, with multiple companies launching fleet-wide risk reviews.

They are not the first to feel the heat as the compliance landscape shifts underneath them and they won’t be the last.

Richard Meade
Editor-in-chief, Lloyd’s List

Click here to view the latest Lloyd’s List Daily Briefing