Iran Evades US Sanctions Through Ship-to-Ship Transfers
Iran has been circumventing US sanctions by using ship-to-ship transfers to export oil to China, according to a report by the Wall Street Journal. This method involves sanctioned ships offloading their cargo onto another vessel in international waters before it is sent to China.
The receiving ships are often part of Iran‘s “shadow fleet,” a collection of old and rusting tankers that obscure their owners and may switch flags to conceal their identities. These vessels will sometimes turn off their tracking devices and paint over identity numbers, making them difficult to detect.
Chinese Support for Iran’s Shadow Fleet
China plays a crucial role in supporting Iran‘s shadow fleet. According to the WSJ, China registers many of the tankers’ legal owners in Chinese cities and sends many of the ships’ crews from China. Chinese ship management companies openly advertise jobs on shadow fleet tankers, offering extra pay for the risk of sailing these older vessels.
China has also explicitly encouraged companies to ignore US sanctions. This month, China ordered firms not to comply with sanctions on five of its refineries, invoking a 2021 rule designed to combat foreign laws believed to violate international norms or restrict trade.
Malaysia’s Limited Enforcement Jurisdiction
The ship-to-ship transfers primarily take place in the Eastern Outer Port Limits (EOPL), an area midway between Chinese and Iranian territory. The EOPL has calm waters and is in a legal gray area within Malaysia’s exclusive economic zone, but outside territorial waters. Maritime Vice Admiral Saiful Lizan bin Ibrahim, a senior official in Malaysia’s coast guard, acknowledged the fleet’s presence but explained that Malaysian authorities could not intervene as the ships are outside Malaysia’s “direct enforcement jurisdiction.”
Malaysia has detained over a dozen vessels for unauthorized anchoring over the past year, but it has limited resources and maintains a neutral foreign policy, meaning it does not automatically comply with foreign sanctions.
Limited Effect of Enforcement Actions
Even when authorities do take action, it can have a limited effect. After Malaysian authorities detained a US-sanctioned vessel, the Nora, a 24-year-old ship registered in Shanghai and conducting a ship-to-ship transfer of Iranian oil in January, the vessel received a $33,000 fine. The Nora was tracked to Iran‘s main oil export hub, Kharg Island, less than two months later.
Despite these efforts, China continues to receive Iranian oil at a discount to international prices, accounting for about 45% of Iran‘s government budget. This arrangement has allowed Iran to take in around $31 billion in oil revenue from China, according to the US-China Economic and Security Review Commission.
Original Article: Iran evades US sanctions, exporting oil to China via ship-to-ship transfers — Jpost