Israel Matzav: How Iran evades sanctions: Shipping

How Iran evades sanctions: Shipping

How ineffective are the current sanctions against Iran? Consider this:

The United States accused the Islamic Republic of Iran Shipping Lines (IRISL) of carrying military cargo to Iran and of helping Iran circumvent U.N. sanctions. The U.S. action, which was taken pursuant to Executive Order 13382, froze all IRISL assets under U.S. jurisdiction and banned all transactions with U.S. parties. The ban extended to all of the company’s owned or controlled subsidiaries or sub-units, including individual marine vessels. The Treasury Department’s Office of Foreign Assets Control (OFAC), which is responsible for enforcing the ban, published the names and unique IMO (International Maritime Organization) numbers of the 123 vessels, and instructed U.S. banks to reject any funds transfer referencing the name of a banned ship. Freight forwarders and shippers were also forbidden from chartering, booking cargo on, or otherwise dealing with the blacklisted vessels.

IRISL has responded to Treasury’s action with a wholesale – and ongoing – renaming of its ships. The response has often included dropping “Iran” from ship names. “Iran Brave,” for example, has become “Margrave,” “Iran Dolphin” has become “Alameda,” and “Iran Matin” has become “Abba,” to name just a few. In all, at least 80 vessels have been renamed so far; 40 of these had the word “Iran” in their names before the change, and all 40 emerged without it.

In addition to renaming sanctioned vessels, IRISL began transferring nominal ownership of the ships to shell companies, mainly in Malta, Germany, and Hong Kong. IRISL already had operations in these locations, making them convenient spots to set up new front companies. IRISL (Malta) Limited, for example, now shares its office space in a low-rise apartment building in the city of Sliema with a host of newly formed companies, including Jackman Shipping Company, Newhaven Shipping Company, Lancing Shipping Company, Oxted Shipping Company, and ten others, each of which is now the new registered owner of an IRISL vessel. The same pattern was followed at IRISL’s German branch. The Hamburg address of IRISL Europe GmbH is now also home to “Seventh Ocean GmbH and Co.,” “Eleventh Ocean GmbH and Co.,” and “Twelfth Ocean GmbH and Co.” These companies are the new owners of the sanctioned vessels formerly known as “Seventh Ocean,” “Eleventh Ocean,” and “Twelfth Ocean,” which have been re-named “Gabion,” “Daffodil,” and “Dandle,” respectively.

These are not the only steps IRISL has taken to distance itself from its vessels. In 2008, the company managed almost all of its ships. Since then, a company called “Soroush Sarzamin Asatir SSA,” based in Tehran, has emerged to take on the role of ship manager for more than half of the sanctioned vessels. In fact, this company seems to deal exclusively in sanctioned, renamed IRISL vessels.

The combined effect of all these changes has been to make it harder for honest companies to comply with U.S. sanctions. Whereas running a compliance check on a transaction involving one of these ships in late 2008 would have raised several red flags, changes made by IRISL since then mean that the same transaction today would probably appear clean. Only each ship’s unique IMO number is unchanged. But these numbers do not always appear on cargo documents, such as letters of credit. So, any U.S. company that screens a vessel against Treasury’s sanctions list without checking the IMO number is at risk of taking part in an illegal transaction.

The US promised at the time to update its sanctions list. It never has.

What could go wrong?

Israel Matzav: How Iran evades sanctions: Shipping