Sinokor Group, the world's largest very large crude carrier (VLCC) owner, has decided to pay sailors shuttling through the Strait of Hormuz an extra six months of salary on top of base pay. It is an exceptional offer, pledging a total of seven months of wages for roughly a one-month voyage that loads crude in Saudi Arabia or Iraq and exits into the Gulf of Oman. As U.S.-Iran clashes have intensified recently and the risk of death has grown, "life allowances" for crews on Middle Eastern crude, surging war-risk insurance premiums, and spiking tanker freight rates are all being billed on top of each other.
Bloomberg said on the 20th (local time) that as recruiting sailors became as hard as picking stars from the sky, Sinokor circulated documents with these terms to crews starting on the 17th. According to the industry, the current monthly wage for a tanker captain is up to $15,000 (about 22.3 million won). Excluding senior officers such as deck officers and engineers, entry-level deck and engine crew earn about $1,500 (about 2.2 million won). Under these terms, a captain would receive up to $90,000 (about 134 million won) as a bonus for a single voyage, and a junior crew member would receive $9,000 (about 13.4 million won). Including regular pay, each would pocket up to $105,000 and $10,500 for a one-month voyage.
However, the situation in the strait is tough enough to require such sweeteners. According to the United Nations' International Maritime Organization (IMO), at least 59 merchant ships have been attacked in the Persian Gulf and surrounding waters since the Iran war began at the end of February, based on confirmed figures. In the process, 17 sailors lost their lives. After the 17th, attacks targeting ships in the strait killed at least two more sailors, and on the 20th, one vessel struck by Iran was left damaged and abandoned.
Captains and crews are not obligated to risk boarding just because they are offered money. The captain has final authority over routes and navigational safety. Even if the shipowner orders a passage through the strait, the captain can change course or refuse to embark based on on-site judgment. Ordinary sailors who do not want to enter a danger zone can request to disembark and ask to be replaced. Because of this, other shipping companies have already been paying up to 60 days of wages as a bonus for 30-day voyage contracts since the war with Iran began, Bloomberg reported. The 180 days Sinokor has put up this time is three times that. The industry takes it to mean that two months' worth was not enough to secure the necessary crews.
According to the Baltic and International Maritime Council (BIMCO), which drafts standard contracts for global shipping, when an owner pays extra wages to crews due to war risks as in this case, the charterer who hired the ship must reimburse the owner for the actual amount paid. Additional war-risk insurance premiums are handled the same way. Typically, crude carriers are chartered by oil-producing countries, oil trading companies, or refiners. The expense they pay additionally is partially passed through to gasoline and diesel prices via refiners' crude import costs.
If we assume 25 sailors each earn an average monthly wage of $4,000, the aggregates bonus for six months comes to $600,000. Divided by the 2 million barrels of crude a VLCC can carry, that adds $0.30 per barrel. Meanwhile, war-risk insurance premiums, which were 0.25% of the vessel's value before the Iran war, have recently jumped to 3%–10%. For a $100 million tanker, that means an additional $3 million–$10 million in premiums compared with the transfer. Using the same basis as the wage-bonus increase, that is $1.50–$5 per barrel. Combining the two increases, a rise of at least $1.80 per barrel is expected.
The U.S. government currently estimates combined throughput of the Strait of Hormuz and bypass pipelines at about 14 million barrels per day. That is two-thirds of the roughly 20 million barrels before the war. Daily VLCC transits through the Strait of Hormuz dropped from an average of eight at the end of June and early July, to five the previous week, and to two in the past week. Experts see additional bypass capacity via Saudi Arabia and the United Arab Emirates (UAE) pipelines at 3.5 million–5.5 million barrels. As a result, concerns over crude shortages have grown, and Brent rose intraday to $91.42 per barrel on the 20th.
Pradeep Chawla, chair of GlobalMET, which handles crew training, said in a Bloomberg interview on the 20th, "Some companies are offering large bonuses," and added, "I've heard many sailors have left their ships, but you can still find people who are willing to go."