The FSO Safer Story: How the world gave the Houthis an oil tanker

This edition of the Loiseless Podcast is brought to you by Veson. This is a story about a ship that has been used as floating bomb, as political leverage, as an environmental threat. It's a story about how the international community was convinced into raising $50 million to buy a group designated by the US government as terrorists, a ship. And how that ship is being used today to store sanctioned Russian cargos. And it's a story about how an Islamist political organisation that emerged from Yemen in the 1990s, that at that point barely even registered on regional risk lists, has been allowed to rapidly evolve into a powerful military organisation, apparently able to defy the combined naval protection capacities of the entire Western world. And it's a story about why that transformation is far from over and why the threat to shipping is growing. But let's start with that ship. The sorry saga of the FSO SAFER, a nearly 50-year-old decaying husk of a tanker that has become a floating metaphor for Yemen's intractable political problems, it's going to be familiar to many of you listening. And that's because it's been the subject of international headlines for years. It's been a fundraising project for children's bake sales, and it is arguably the single most discussed ship inside the UN Security Council. The abridged version of the story goes something like this. FSO SAFER, one of the largest tankers ever built, was once used to help store the country's oil production. But somewhere between the many wars that shaped modern-day Yemen, FSO SAFER became a floating bomb used for political leverage. At this point, I'm going to hand over to an expert on the FSO SAFER, Ian Raobi, Chief Executive of the Consolvency IR Consilium, and one of the leading voices that raised the alarm about the decrepit FSO SAFER many years ago. The FSO SAFER started life as a very large crew carrier in 1976, and was converted to a floating storage and offloading facility for C-POC, the state-owned oil company of Yemen in 1989. Since 1989, it has been attached to the 272-mile long Marib Rossi's of pipeline. It includes a 4.8-nautical mile stretch beneath the sea from Rossi's out to where it's been mored these last decades. In 2000, it was due to be decommissioned. That was then extended till 2005. That was then extended till 2010. That was then extended till 2015, and by the time the extension had come to its close in 2015, war had emerged. And unfortunately, the FSO SAFER became a microcosm of the conflict because it was a state-owned oil company that owned the infrastructure and the oil. It was owned by the government of Yemen, but in Houthi-controlled area. And as a result, what we saw was a dynamic that led to serious concern about a catastrophic spill. Now, that spill in environmental terms would have been absolutely monumental, at least four times the size of Exxon Valdez, and one of the most consequential in history. From a humanitarian standpoint, it would have also been, unlike any we've seen before, on account of the desalination plants along the Red Sea coast that would have taken away the drinking water supply for some tens of millions of people. And given us a three-day lead in order to find alternative water supplies for those tens of millions of people. So it was a massive issue, and in 2018, my team and I started trying to raise visibility of this issue, which was getting no public attention at the time. And we were very involved in building relationships with those who were on board the vessel, because it was not abandoned as some reported, but was actually screwed by seven-scaled members from C-POC who did an amazing job of keeping it going despite all the systems gradually breaking down, including the anerting system that maintained the air above the oil pockets at an inert level. So it did not explode. The cooling system started to go down the anti-cathoting, the present, the rusting started going down. All of the systems were dying, and yet no one was coming up with anything to approach the solution. And so after a lot of work of raising issues and some near misses, particularly in 2019 and 2020, we put forward a proposal during the pandemic, mind you. At the time, the battle in Marib was raging, and the pandemic meant we couldn't get anywhere to transfer the oil from the software onto a C-worthy tanker and leave it out 4.8 miles off Rassisa so that we could preserve the equities of all the interests around the oil itself, the infrastructure, and everything else. And yet, in 2023, the UN decided to then implement that plan, a slightly different context at that point, no longer a pandemic, no longer the battle in Marib. And so a very different context, so an outdated plan for that situation, and unfortunately, the UN's understanding of the situation meant that it was focused on just the first phase, which was to move the oil onto a C-worthy tanker. And that was blocked numerous times by the Houthis already, even though the Houthis were essentially getting a gift out of it. And now we've come to the position where they never got past phase one, two years later, we have a floating storage facility that the Houthis are now using for their own benefit and to the detriment of the global order. So this was a situation of both environmental and humanitarian consequences that had some very good intentions behind the UN operation, but unfortunately, unforeseen consequences that were incredibly foreseeable have now gotten in the way and created a situation that is overwhelmingly undesirable, given the broader context of ongoing Houthi engagements with the shipping industry trying to wage an ongoing war against world commerce. There's a better way to manage claims and it starts with AI in the IMOZ platform. Introducing IMOZ X claims co-captain, the AI assistant that tackles time-consuming tasks like document gathering, data entry and lay time prep so your team can focus on managing the claim itself. With everything in the IMOZ platform, your P&L updates automatically as claims progress, giving you real-time visibility into financial impact built on IMOZ powered by AI. Visit verso.com/claims to learn more. OK, so I appreciate there is a lot of detail there, but it's important to understand that when you're talking about FSO SAFA, you're not just talking about a single ship or a single event. The SAFA's problems are manifold and intertwined with international events that directly impact shipping today. And we're going to talk about how this latest chapter for ship's turbulent history should be read as a cautionary tale about the evolution of risk in maritime trade, and that's coming in the second part of this podcast. But for this edition, I would have focused on what's been happening on the ship itself. The context that Ian explained there shows how and why it was so urgent to get the oil off the SAFA at the time. Suffice to say, the calculus of risk back in 2023 demanded it necessary to spend $55 million of UN raised cash to a Burton oil spill that would have cost over $20 billion to clean up. The story of what follows is quite unprecedented. Essentially, the UN needed to raise the cash to buy an oil tanker to replace the FSO SAFA, and so what followed was an international fundraising exercise that saw everything from national governments to oil companies to the US. And even that was not enough. The UN eventually had to borrow $22 million to complete the mission. Either that, or it was going to risk another winter of rough seas with the SAFA already on the brink of disaster. But it did. And in August 2023, a UN coordinated operation transferred just over 1 million barrels of oil to the SAFA replacement vessel, Yemen, at that point known as Nautica. The oil transfer prevented the worst case scenario, a catastrophic spill four times greater than the 1989 X on Veldes' spill. But that was not the end of the story, not by a long stretch. Laws list, Maritime Risk Analyst, Terma Ranan picks up the story for us. The main rush was to get the cargo off the SAFA. That was because the decaying status of SAFA in the risk of environmental oil spill. So that was the most immediate thing that needed to take place in that up in in August 2023. Now, the next phase is including, included sort of scrapping the SAFA, which then was that money was supposed to be used to fund other parts of the operations, for it's that that was supposed to be catenary anchor leg mooring boy. So that was how I took the money out of the SAFA. So that was the only thing that was supposed to be done was by the SAFA recycling. But the negotiations sort of ran into delays and that happened just around the time that the Houthis began their Red Sea attacks and that threat environment changed dramatically. If effectively, events overtook the best lay plans of the United Nations. So what actually happened? The ship was purchased by the UN and the transfer, the only ship was transferred to Seapock, the national Yemeni oil company. But in essence, the Houthis took over the ship and they are the ones that control it, not Seapock. So Seapock might be the registered owner on paper, but control is with the Houthis and they are essentially using it as floating storage. All of which takes us pretty much up to present day, where the now largely empty FSO SAFA is more next to the Yemen, which is now filled with the oil from the SAFA, and both of them are under the control of the Houthis, who, by this point, have managed to divert 60% of maritime trade away from the Red Sea via a campaign of attacks on passing ships. More on that in the next episode, but on the Yemen, things are still happening. Specifically, we started tracking ship-to-ship transfer operations, taking oil off and onto Yemen back to Tehran. I received a tip from an analyst, I'm in contact with basically saying to look at the Yemen, and see that some cargo that it's taken enough, enough loaded, and what I saw was that indeed took on several cargo from ships that came from Russia. There was at least three ship-to-ship transfers involving ships that came from Russia. We also have one that came from Fugira, and a new one that we've recovered since, we're not entirely sure where they all came from. The ship was spoofing and then it does go into Fugira, and then it comes out, does a ship-to-ship transfer with the Yemen. The vessel itself was a few months later, was sanctioned by OFAC. Interestingly, the owner was designated in the OFAC pressfully stated that the owner had connections with OFAC. Always list subscribers will already be aware of the details of this story, but I would urge you to go back and read about the detailed corroboration efforts we went through to track these ships using AIS tracking data and satellite photography to uncover the trades. Suffice to say, our reporting has effectively been confirmed by the UN who was watching these transfers all the time, but had no way of stopping them. Essentially, we now have two tankers under the control of the Houthis, and the UN has pretty much no leverage over what's happening on board. In the long list of scenarios that could have gone wrong with such a maverick and unprecedented plan to buy the Houthis a ship, the emergence of the Houthis as the pivotal forcing global trade was not high up anyone's risk list. Nor was the prospects of the donated tanker, and its rusting predecessor, becoming Houthi controlled trading platforms for Russian gas oil. The fact that the UN Development Programme today finds itself in the very awkward position of paying a monthly fee of $450,000 to maintain a ship that is now controlled by Iranian proxies and being used to store Russian gas oil is obviously a problem. It's an embarrassing problem at that, but the bigger problem is that it is effectively gifted to the Houthis, yet more political leverage even as Israel and US Air strikes seek to diminish their power. I think the Houthis were very astute in the buildup to all this, and they knew that they were going to basically be a gift. The fact that the UN is still paying monthly, I think, close to half a million dollars per month to keep it crude and insured. So you're absolutely correct that it's essentially a gift of a floating storage tank of further Houthis, which is all the more important to them now because Israeli and American Air strikes have destroyed much of their own shore sort of bulk storage capacity if we're looking at the tax and Rossissan Hodeita. And the point here is that none of this is happening in isolation. The way in which the international community has tried to deal with Houthis and the FSO SAFA is directly linked to the way it has tried to deal with Houthis and their attacks on ships in the Red Sea. While the urgency of removing the oil from the FSO SAFA was never in doubt, the unintended consequence of the plan to address that problem has played out much to the benefit of the Houthis, who have essentially been gifted a storage facility, bought with and maintained by donor money and UNDP funds. After a seven-month hit, the Houthis earlier this month announced their return to a campaign against shipping that continues to divert global trade and has rewritten the rules of risk and shipping. The attack on the Magic Seas and Eternity Sea effectively resets the clock on any remaining hopes that the Red Sea will reopen to the majority of trade. Regardless of the frequency or accuracy of their targeted hits, ships have not returned to the Red Sea. Volumes remain stubbornly within the new normal range of 60% lower than pre-houthier attack levels before this latest series of hits. And all that adds up to the fact that the situation is going to remain unchanged as long as the Houthis present a credible threat to ships. And right now, there is scant evidence that the Houthis power to hold the world to ransom is in any way diminished. And the story about the Houthis' power and what it means for shipping is where we are going to pick up this story in the next edition of this two-part podcast. So now though, thank you to Ian and Toma and thank you for listening. I will be back with part two shortly. This edition of the Loiseless Podcast is brought to you by Veson.