Ships chartered by two oil traders responsible for a significant share of Iran’s fuel exports last year failed to transmit their location and the origin of their cargo — red flags for governments seeking evidence of evasion of sanctions on Tehran.
The ships’ radio-signal tracking systems were often not in use and occasionally indicated the ships had sailed from countries other than Iran, a Wall Street Journal investigation found.
The U.S. government is analyzing movements of ships in the Persian Gulf for any attempts to circumvent bans on funding Iran’s weapons programs or clearing payments for Iranian oil through the U.S. financial system, a U.S. official said. U.S. officials said they weren’t familiar with the particular shipments identified by the Journal.
This scrutiny come amid uncertainty in the U.S. about the future of the 2015 multinational agreement in which Iran pledged to scale back its nuclear program in return for the lifting of most international sanctions.
President Donald Trump has cast doubt on whether his administration will continue to support his predecessor’s commitment to the deal. U.S. officials said the White House is reviewing its Iran policy and considering stiffer measures. Shortly after Mr. Trump took office, the administration imposed new sanctions related to Iran’s defense and ballistic-missile programs.
While the nuclear agreement lifted many obstacles to doing business with Iran, the U.S. maintains sanctions that make it difficult to trade Iranian oil. A ban on clearing payments through the U.S. financial system hinders trade because oil is mostly bought and sold in dollars. The U.S. also prohibits doing business with blacklisted entities including the Islamic Revolutionary Guard Corps, a military division that is dominant in Iran’s economy.
In the second half of last year, 47 of 55 ships carrying Iranian oil products from Iran to the United Arab Emirates for two U.A.E.-registered companies didn’t emit signals from the system that transmits their position and course, for part or all of their journey, according to an analysis of the two firms’ shipments that was completed for The Wall Street Journal by ship-tracker Windward Ltd.
Ships that sail without the radio signal transmitted by its automatic identification system, or AIS, can still be tracked by companies such as Windward, an Israeli firm that uses satellite imaging to map routes.
The 47 shipments by the two U.A.E.-registered traders, Silk Road Petroleum FZE and Petrochemix General Trading LLC, accounted for 17% of Iran’s fuel oil and gas oil exports during the six-month period, according to records compiled by the oil-product traders.
The records, based on information from state-run National Iranian Oil Co. that shipping agents combine with their own information and provide to traders, listed the vessels’ cargo as fuel oil or gas oil. Iranian authorities didn’t return calls and emails seeking comment about the shipments.
A shipowner, the ship’s master — the person responsible for the navigation of the vessel — or the trader who chartered the vessel could give an instruction to shut off the AIS. U.S. investigators would likely look into the trader’s responsibility in such situations in addition to the shipper, said Richard Nephew, who served as deputy coordinator for sanctions policy at the State Department from 2013 to 2015 and is now a senior research scholar at Columbia University’s Center on Global Energy Policy.
“In most cases we assume it’s not plausible that a trader would be ignorant of any attempts to avoid international monitoring of ship movements especially if it occurs on multiple shipping companies with the same trading company,” he said.
Oil traders typically monitor the movements of their cargoes and would be in a position to know if the AIS isn’t transmitting location, according to shipping and sanctions experts.
Of Silk Road Petroleum’s 46 shipments in the period, 40 emitted no tracking signals. The company didn’t respond to requests for comment emailed to an address in the directory of the U.A.E.’s Hamriyah Free Zone Authority, where the company is registered. The email address was recently removed from the directory.
In the nine Petrochemix shipments in the second half of 2016, seven ships emitted no AIS radio signals at some point. A co-owner of Petrochemix, when asked about the shipments, said Petrochemix had no relations or business with Iranian companies, and that any AIS shutoff was a matter for vessel owners. Petrochemix chartered tankers owned by seven different shippers during the period.
The 47 shipments during which AIS was off were handled by 15 vessels. Many of the shipowners couldn’t be reached, and one declined to comment. One shipper said many charterers tell ships to shut off the AIS because “most major banks don’t want to deal with” such trade.
“The single biggest issue preventing wider trade between Iran and the rest of the world is the continuing reluctance of international banks to process payments to and from Iran,” said Sue Millar, partner at law firm Stephenson Harwood LLP.
Blue Ocean Shipping Lines, an owner of one of the vessels chartered by both companies for a total of nine shipments, said its ship’s AIS was broken at the time. Another shipper said the AIS was never intentionally switched off, nor was any “AIS deficiency” reported.
Shipping guidelines advise ships to use tracking systems to avoid collisions between vessels or locate them if they need to be rescued, though there is no penalty for not using the systems.
The main legitimate reason to switch off a ship’s tracking system would be to evade pirates, said Andrew Bardot, chief executive of IGP&I, an association of marine liability insurers. However, none of the 191 reported incidents of piracy and armed robbery on the world’s seas last year occurred in the Persian Gulf, according to the International Maritime Bureau, a London-based trade body set up to fight maritime crime and malpractice.
“This tactic can also be used to hide the genuine details of a voyage so as to enable the breach of sanctions,” said Pottengal Mukundan, director of the IMB.
A U.S. Treasury official declined to comment on the shipments identified by the Journal. “We take allegations of sanctionable conduct seriously but we do not comment on applicability of sanctions in individual circumstances,” the official said.
This year the U.S. government said a Taiwanese shipping company had violated Iran sanctions, and in its finding said the company left ship logs blank and switched off the vessel’s AIS to conceal a ship-to-ship transfer of Iranian crude.
Apart from tracking cargo, the AIS system is used to provide location information to insurance companies, banks and others. But it can be manipulated to indicate a ship is somewhere that it isn’t, by manually entering incorrect coordinates or ports. Radio signals issued by as many as 16 of the 47 ships indicated their Iranian cargo began the journey in a different country, though satellite imagery showed them to have been loaded in Iran, according to Windward. That suggests the signals may have been used to transmit false location information, Windward said.
“A misdeclaration of the ports of loading or discharge would be one of the indications that the voyage breached sanctions,” Mr. Mukundan said. “In any case, such a misdeclaration would be improper and misleading.”
Hiding a cargo’s Iranian origin would allow an exporter to be paid more easily in dollars or conceal the involvement of blacklisted entities, according to London law firm W Legal Ltd, which specializes in sanctions law.
“The U.S. administration is watching Iran-related business like a hawk,” said Nigel Kushner, chief executive of W Legal.
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