Just weeks after taking office in January, US President Donald Trump declared a “maximum economic pressure” campaign on Iran and vowed to drive Tehran’s oil exports to zero, in a bid to slow its nuclear ambitions.
GTR speaks with David Tannenbaum, a partner for maritime intelligence at Pole Star Global and director of Blackstone Compliance Services, about the White House’s use of sanctions in the region and growing evasion risks.
GTR: How has US sanctions policy evolved under President Trump’s administration? Has there been a significant shift in focus towards the Middle East, and in particular, Iran?
Tannenbaum: The Trump administration is wielding sanctions in support of two main policy goals: counter-narcotics and pressure on Iran.
The White House is laser-focused on undercutting Iran’s dark fleet capabilities and its energy revenues, with a third of all sanctions designations focused on Iranian shipping. We are starting to see a shift in the landscape: instead of just going after vessels, they’re targeting all the other parties, whether it’s a Chinese teapot refinery or a terminal operator storing crude oil.
This is really a continuation of a strategy that was pioneered under Joe Biden following the October 7 attacks on Israel. The Biden administration began designating vessels while cargo was on the water. Essentially, the US started daring everyone, saying: ‘Hey, port operator, provide services to these vessels, see what happens’. This tactic was effective and it caused vessels to turn back with full cargo, or they would linger for six months trying to find a buyer – ultimately taking a steep discount.
GTR: Who is buying Iranian oil currently, and are their sanctions evasion techniques changing?
Tannenbaum: The buyers are the usual suspects – Chinese teapot refineries and India are the two big consumers of Iranian oil. You also have intermediary countries such as Malaysia, where ship-to-ship (STS) transfers take place.
The sanctions evasion tactics have largely stayed the same, though are becoming more advanced. We are yet to see the full impact of OFAC’s [the Office of Foreign Assets Control] designations of Chinese terminals, but there is clear evidence of sanctioned parties corresponding directly with port operators and no attempts to hide their emails or identity. OFAC has issued warnings to these players, essentially saying: ‘Do this again and we’re going to sanction you.’
It will be interesting to see if it changes their behaviour. There’s been a lot of reporting recently of India’s Adani having purchased liquefied petroleum gas from Iran. I don’t think the buyers have changed yet. If the sanctions bite, I’ll be interested to see where Iran goes.
GTR: How are companies working to obfuscate the origin of Iranian oil?
Tannenbaum: Automatic identification system (AIS) spoofing, the act of faking a vessel’s location through AIS, was coming into vogue a few years ago, and in the past 24 months, has become the predominant form of sanctions evasion. It’s a little weird when I see people just disabling their AIS transponder these days, which is a less complex form of sanctions evasion. To put it in context, there are probably 1,400 vessels on our ‘dark fleet’ list. If you look at the Iranian and Venezuelan vessels, about 50% of those are definitively engaged in spoofing. That number might go up.
The worrying part is that spoofing started out fairly basic, and we do still see box patterns or geometric circles. But to put this in context, one vessel that we follow religiously is the Bonanza 10. I was just looking at it yesterday, and it created a fairly good-looking AIS track. When a vessel is typically anchored, you will see them make this kind of crescent shape rather than just a crude little box – and they were emulating that crescent shape. Of course, when we pulled the satellite image, the vessel wasn’t there. Such tactics are alarming; they are making it harder. Within a year from now, people will not be able to simply look at the raw AIS data and determine if spoofing is occurring. A lot of these tracks are becoming very realistic.
STS transfers also continue to happen and often involve multiple ships. They are becoming more complex with additional layers. In March, the US Department of Justice brought an indictment against one firm – it was not explicitly named – over US$47mn-worth of oil stored in Croatia. In this case, the DOJ detailed how the cargo passed through five different vessels, including a prominent floating storage vessel, before winding up in bonded storage maintained by a sanctioned party.
GTR: In terms of STS transfers, in which jurisdictions do they tend to take place?
Tannenbaum: Malaysia remains a hotspot, but there’s also a lot of ship-to-ship transfers for the first leg of the transaction in the Persian Gulf. Some of the spoofing where the vessel pretends to be off the coast of Oman is actually related to STS involving an Iranian vessel. Most STS transfers are perfectly legitimate for logistics purposes or to find new buyers. However, we’ve been looking at meetings between two different dark fleet vessels – what we call dark-to-dark – to find out of the way areas where these STS transfers aren’t ordinary.
GTR: Are there particular red flags that you are advising clients, such as banks or commodity traders, to watch out for?
Tannenbaum: The big red flag that we’re advising clients on – at least on the first leg of a shipment – is firms trying to pass off Iranian oil as being either from Iraq or Oman. We’re seeing fraudulent bills of lading, port clearance, last ports of call and inspection certificates. We’re even seeing inspection certificates where they try to impersonate a reputable business. I saw one certificate from a very well-known inspection company – I won’t name who they are – but we figured out that it was a fake certificate because they used a logo recreated in Excel. On PDF, it looked real. However, when you clicked on it, the metadata showed the file name as .xlsx, so it was an Excel file.
As highlighted in the recent Financial Crimes Enforcement Network advisory [on Iran’s oil smuggling activities], another big red flag is sanctions evaders will re-label their oil as Malaysian – we know there’s a lot of blending there. There’s one company in the UAE that we believe is blending UAE and Iranian distillates, so petroleum products, and labelling it as UAE. But obviously, there’s a lot of legitimate commerce originating in the country.
Another red flag can be seen on the final leg of a transaction, particularly to China. Companies will list a bonded warehouse or terminal as the origin of the goods. Clearly, that’s not a valid certificate of origin. But it’s a cute little trick they like to play.
GTR: Non-resident accounts (NRAs) have also been cited as a potential red flag to watch for. Is this an emerging trend or a long-standing means of evading sanctions?
Tannenbaum: I’ve been dealing with cases that involve NRAs since at least 2015, though such accounts aren’t inherently bad or suspicious. There have been calls for banks to stop offering them, but this would be problematic – you would risk halting a lot of legitimate commerce in Hong Kong.
If you’re a Chinese company that sells toys, as an example, you cannot export and send money to suppliers or shippers without triggering currency controls in China. An NRA helps you conduct your business legitimately, but may also be used to smuggle a lot of Iranian crude.
Still, they should be examined in conjunction with other red flags to spot sanctions evasion. Unfortunately, major Iranian sanctions evasion networks such as Triliance, Sahara Thunder and Oceanlink abuse these accounts. The final leg of their transactions usually involves a front company incorporated in Hong Kong, and so they need these NRAs to transact outside of Chinese currency controls.
GTR: In late June, President Trump issued an executive order that lifted sanctions on Syria and opened up access to US-made goods and financial services. What impact is this having on your clients?
Tannenbaum: Some folks are full steam ahead, and they believe they can control the risk. But you still have foreign terrorist organisations there, Hezbollah Iran is operating there, and Ukrainian grain stolen by Russia has been frequently sent to Syria. There will be a bifurcation of the market, as we saw with Myanmar.
Some banks may permit business [in the country], especially after gaining additional comfort with the lifting of the Syria Sanctions Regulations, but it will be up to that bank’s risk tolerance. For example, they may choose to engage in humanitarian and non-commercial personal remittances, which might be viewed as less risky than something like financing construction projects, which run a greater risk of involving a blocked person.
