Topic: Sanctions, Satellites, Suspect Ships
Speaker: Abhiroop Mukherjee, Professor, The Hong Kong University of Science & Technology
Time: 10:00am-11:30am, April 24
Location: 4-101
Abstract:
Current sanctions policies require that third parties such as banks and insurance companies identify and avoid engaging with violators. We focus on the global oil shipping industry to show that: (1) such identification is inherently challenging, and (2) disclosing the identities of suspected violators, instead of having third parties determine them, can reduce the profitability of violations. First, we utilize a unique dataset of tankers that actually breached sanctions on Iran in January 2021, and take the perspective of a sophisticated third party trying to detect violators using machine learning and satellite data. We find that even such an actor would have to stop doing business with a third of their clients to have a 95% chance of avoiding violators. Second, we show that when Reuters released a list of suspect tankers – alleviating identification problems for third parties – the market reacted by imposing significant penalties on these vessels. Suspect tankers saw their earnings drop by 20.5% after the disclosure, for a total loss amounting to around $781 million a year. They also began to steer clear of Russian, Iranian, or Venezuelan waters, became far more difficult to sell in the market for used tankers, and saw a 53.7% drop in their likelihood of being chartered by U.S. companies.
Speaker Biography:
Abhiroop Mukherjee joined HKUST in 2010 after receiving his PhD in Economics from Yale University, where he worked under the supervision of Professors Nicholas Barberis, Andrew Metrick, and Robert Shiller (Nobel Laureate, 2013). He studies issues related to behavioral and institutional finance, and has a keen interest in emerging markets. Abhiroop’s research has been published in all of the three top academic journals in finance, and some of his work has been used in applied settings by banks, hedge funds and think tanks, both in Asia and in the U.S.
