Iran sends out ghost tankers as sanctions loom

A supertanker called Happiness is carrying 2m barrels of trouble for Iran. The crude vessel filled up at a terminal operated by Iran’s national oil company on Kharg Island at the start of this month, before setting off on a journey for Asia, according to ship tracking data. But it was sailing into a global market where Iranian oil is acquiring pariah status.

When Happiness I — its official name — exited the Strait of Hormuz the tanker turned off the system that allows traders to track its movements. As the US prepares to reimpose sanctions on Tehran’s energy sector in November, the vessel joins a fleet of ghost ships that symbolises the pressure growing on Iran to hide the identity of its buyers.

Following President Donald Trump’s withdrawal from a nuclear deal Iran signed with world powers, he is seeking to cripple the Iranian economy with sanctions that impose severe financial penalties on any party involved in trading its crude.

Iran cannot easily abandon the lucrative export business that generates much needed government revenues. There are growing signs of the country reverting to an old playbook of selling in secret.

Happiness I is one of at least seven tankers carrying Iranian oil that are no longer broadcasting their position. The tanker “has not sent a signal since” turning off its transponder on September 16, said Matt Smith, director of commodity research at ClipperData, which is tracking the vessels filled with Iranian oil.

“We saw this happen in years past when Iran’s economy was under pressure from sanctions. We are now seeing the same thing again, with Tehran being surreptitious with its crude flows,” he added. Iranian oil officials could not be reached for comment.

Iran has been exporting about two-thirds of its crude production, which reached around 3.8m barrels a day earlier this year. When the Obama administration placed sanctions on Iran in 2012, it permitted oil exports of around 1m-1.5m barrels per day. But the Islamic republic still plunged into a deep recession. The Trump administration is taking an even harder line, declaring that it is not willing to countenance any exports of crude or ultralight condensate oil.

Since May, when Mr Trump withdrew from the nuclear deal and announced forthcoming sanctions, Iran’s oil exports have dropped by at least 500,000 barrels a day to below 2m, according to energy sector analysts, whose estimates generally include tankers without specified destinations.

The fear of US sanctions and a drop in oil revenues, the country’s main source of foreign currency, has already led to a decline of about 70 per cent in the national currency, the rial, this year.

Iran's oilfields map

South Korea and France are among countries that have halted their purchases completely. China and India — the biggest buyers of Iranian crude — are taking in fewer barrels. According to FGE, a consultancy, some 10m-15m barrels of Iranian oil are stored on offshore vessels, bereft of buyers. “Iran is having a tough time selling its crude,” said Iman Nasseri at FGE.

The White House is doing its best to turn the screws. This week a senior administration official said the US was helping allies find alternatives to Iranian barrels. Mr Trump has already asked Saudi Arabia to pump more oil to make up for any Iranian shortfall on the world market. Along with Iraq, it has increased production in recent months and pounced on Iranian customers.

Bijan Zanganeh, Iran’s oil minister, criticised Opec rivals that are ramping up production. He told S&P Global Platts on Thursday: “Anyone who says they will compensate for the shortfall in the market is speaking against Iran . . . They should come out and say, ‘The US has phoned and told me to increase output.’”

In Tehran, analysts do not expect the country’s oil exports to cease, but a sharp decline will have an immediate impact on the economy. The centrist government of Hassan Rouhani relies on petrodollars to pay civil servants’ salaries and cover cash handouts to compensate Iranians for rising energy prices. With anti-regime protests already occurring sporadically, public patience may run thin if money began to dry up.

The authorities are racing to adapt. Iran’s Supreme Council for Economic Co-ordination, formed this year to circumvent US sanctions, authorised the oil ministry this week to sell crude into the private sector as it searches for alternative outlets.

It is the first time Iran’s private sector has been officially allowed to become involved in crude sales. Under previous US and European sanctions in 2012, some well-connected businessmen and organisations discreetly sold crude to help the government skip sanctions, but the tactic was not problem free. Babak Zanjani, a businessman, is charged with selling $2.8bn of crude but refusing to pay back the government. He is sentenced to death while awaiting his appeal.

Refiners and others that rely on the global banking, insurance, and shipping industries — which run on US dollars — expect the Trump administration to be more aggressive than its predecessors in hunting down sanctions busters.

Amrita Sen, chief oil analyst at consultancy Energy Aspects, said widespread use of cargo-tracking technology would limit off-radar sales. “There are many more pairs of eyes to spot anomalies and investigate trade flows that do not match — occasional cargoes may go unnoticed, but large-scale smuggling will be too easy to spot,” she added.

Ghost tankers are a symptom of Iran’s problems, but not a cure.

Additional reporting by Katrina Manson in Washington


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