In the world of geopolitics, countries try to have other countries follow the same rules and then the market can do what it does, however all countries do not follow the biggest countries because similar to most issues, it is complicated. An example is the US and Europe imposing sanctions on Russia over the Ukraine. That appeals to the voters in their countries, but the reality is all countries have something they can sell to others. In Russia, outside of the Middle East it has large oil and gas reserves and production. In Russia’s case China needs the oil and gas and if does not go through pipelines it comes in by ships. How does it come?

In an article by Steven Chase of Reuters, Remy Osman has a lovely apartment in Singapore where he can see the tanker traffic. He has a you tube channel which he identifies and captures photos of vessels on route to international waters. Once out of local jurisdiction they sidle up to another ship and transfer their oil shipments.

The growing shipping lanes in the South China sea offshore of Singapore and Malaysia are a growing site for ship-to-ship transfer of oil from countries. The reason it can be done is there are many ships going through the lanes. Once the oil is given to another tanker, it moves the oil likely to India or China.

The reason to do the transfer is to help obscure the origin, destination and ownership of the cargo. It can go to multiple sized ships and mixed with existing crude in a tanker.

The clues for Mr. Osman are: if the AIS (automatic identification system) data being broadcast from the ship is odd. For example the ship is from China but pointed at India. The second is which flag does the ship fly? If it is from an unregulated and underdeveloped maritime country which does not have a merchant fleet, it is suspect. The third clue is the age of tanker – 25 to 30 years is too old.

Singapore is about halfway between Iran, Russia and Venezuela to go to China or India. It is estimate that some 30 ships a month are engaged in the offshore transfers or about 18.2% of global oil tanker tonnage.

If you use the example of cleaning money or once the drug money gets into the bank, it is clean money. Once the oil moves into a local tanker, it is clean oil and not at the jurisdiction of those countries which impose sanctions.

Linking to dividend paying stocks, often times the volume of transactions means that the shadow world can operate in the background. It affects the volumes and the prices and invariably how much profits are gained by the legitimate companies. How the shadow world operates in your investments is important to understand.

There are more questions than answers, till the next time – to raising questions.