In a recent incident that highlights the lawlessness and violence in the seas off the Arabian Peninsula, Iran has once again managed to evade U.S. sanctions and maintain its oil revenue, enabling it to fund proxies such as the Houthis. The seizure of the oil tanker St. Nikolas serves as a rare example of direct involvement by the Iranian military and is widely seen as retaliation for the U.S. seizing the same ship a few months ago.
The St. Nikolas, previously known as the Suez Rajan, had been under U.S. control since April when one million barrels of Iranian crude oil were offloaded. This incident is just one among hundreds of tankers that experts believe are undermining U.S. sanctions and smuggling Iranian oil. These tankers, referred to as the “dark fleet” by Lloyd’s List Intelligence or the “ghost armada” by a group of U.S. congressional representatives, exhibit common traits such as anonymous ownership or ownership that is difficult to track. These ships are typically older than those involved in legitimate trade and often turn off their electronic location equipment or deliberately obfuscate their location when dealing with sanctioned oil. Moreover, they engage in a practice called “flag hopping,” seeking out poor nations that will allow them to register and fly their flag for a fee.
Michelle Wiese Bockmann, Principal Analyst with Lloyd’s List Intelligence, emphasizes that these vessels operate and trade outside Western jurisdiction, primarily shipping sanctioned oil. Countries like Cameroon, Gabon, and the Cook Islands are known to sell flag usage, but Panama accounts for approximately half of the flags in the “ghost armada.” Bockmann highlights Panama’s limited resources to manage the thousands of vessels it flags.
In response to this illicit activity, a group of U.S. Congressmen, consisting of 14 Republicans and one Democrat, has sent a letter to U.S. Secretary of State Antony Blinken, urging him to pressure Panama to “de-flag all the vessels actively evading U.S. sanctions by transporting Iranian oil.” One of the Congressmen, Rep. Bill Huizenga, a Republican from Michigan, states that they are demanding the enforcement of sanctions and the tightening of measures against those doing business with Iran.
The effectiveness of this smuggling operation is evident in Iran’s oil exports. In 2019, Iran was exporting an estimated 400,000 to 600,000 barrels of oil per day. However, according to Mark Wallace, former U.S. Ambassador to the UN and current CEO of United Against Nuclear Iran, Iran now exports approximately 2.4 million barrels per day, with China being the primary buyer.
Mark Wallace expresses concerns about the United States’ deterrence efforts, stating that the country is mandated by law to enforce sanctions on Iranian smuggling. He highlights the alarming number of vessels, around 300, currently involved in smuggling Iranian oil with impunity.
While the smuggling operations continue, the United Arab Emirates and the Iran-aligned Houthi group have recently welcomed a truce that halts military operations on the Saudi-Yemeni border, easing concerns about potential disruptions to oil supply and causing a decline in oil prices at the start of Asian trade.
However, a U.S. State Department spokesperson claims that Iran, being forced into the black market and having to spend resources to evade sanctions, receives only a fraction of the market price for the oil it manages to sell.
The issue of Iran’s evasion of U.S. sanctions through the ghost armada remains a significant concern, as it allows Iran to continue funding its proxies and maintain its oil revenue despite international efforts to curb its activities. Efforts to enforce sanctions and tighten measures against those involved in the smuggling operation are crucial to disrupting Iran’s illicit activities and safeguarding global security.
