U.S. Seeks to Squeeze Shipping, Metals in Iran Sanctions Bid

By Nick Wadhams

The Trump administration plans to strengthen enforcement of Iran sanctions now that it’s driven oil exports down to unprecedented lows, with a plan to increase pressure on global shippers, Chinese state-owned enterprises and exporters of raw materials used in metal production.

The initiatives, described by two U.S. officials familiar with the situation and confirmed by outside analysts aware of the administration’s plans, mark the next phase of President Donald Trump’s bid to squeeze Iran’s economy so hard that the government has no choice but to negotiate new limits on its nuclear and ballistic-missile programs.

Asked about the new moves, Brian Hook, the State Department’s Iran envoy, said in a statement Tuesday that the U.S. is now turning to “all remaining sources of export revenue, including from petrochemicals and metals that are subject to U.S. sanctions.”

At the center of the administration plan, which hasn’t been previously reported, will be guidance issued via the State and Treasury Departments warning ship insurers, banks, charter companies, port owners, crews and captains that they all face sanctions exposure if they can’t account for the legitimacy of the cargoes they carry.

Despite an array of U.S. sanctions since Trump withdrew from the Iran nuclear deal in 2018, Tehran has refused to buckle to American demands for a more comprehensive deal and has moved forward with efforts to enrich uranium. At the same time, President Hassan Rouhani has confronted street protests against price increases and corruption that has left his government cornered politically, potentially benefiting hard-liners even more opposed to Washington.

One element of the new U.S. effort will focus on the automatic identification system used by ships, according to the people. The administration will demand that insurers and ship owners pay closer attention to when ship transponders are turned on and off, and steer clear of doing business with vessels with questionable histories.

The enforcement effort amounts to a renewed bid to overhaul the often shadowy world of global shipping, in which the true owners of ships are easily disguised, vessels fly under the flags of countries that rarely punish them for wrongdoing and insurers and banks turn a blind eye to illicit behavior.

It also aims to close one of the most common means of avoiding sanctions: the ship-to-ship transfers at sea of crude oil, refined petroleum products and bulk goods.

“The U.S., in particular, has started monitoring what these tankers are up to much more carefully,” Hugh Griffiths, the former head of the United Nations panel overseeing sanctions on North Korea, said in an interview. “The main means by which sanctions are being evaded, to the tune of hundreds of millions of dollars in each incident, is through a ship-to-ship transfer in which the AIS is switched off.”

Many of the initiatives planned by the U.S. echo recommendations spelled out in Griffiths’s report from March that highlighted sanctions-busting by North Korea, chiefly through ship-to-ship transfers.

The administration sent a powerful signal to the shipping industry, as well as nations that help Iran evade restrictions, when it imposed sanctions against the Dalian units of China COSCO Shipping Corp. in September. That move led to increases in the cost of transporting oil globally.

One administration official said that should be taken as a signal that the U.S. is willing to target other Chinese state-owned enterprises, including those that operate or lease out terminals and pipelines.

The U.S. is telling ship owners to protect themselves during ship-to-ship transfers by taking photographs with their mobile phones of the crew of the other ship. That would help expose the identity of any potential sanctions violators with whom they unknowingly do business.

The administration is also telling players in the maritime sector that they should review guidance issued in connection with North Korea and assume it also applies to Iran.

“It’s been a huge wake-up call for the shipping industry, which has been scrambling and rates are still escalated,” said Elizabeth Rosenberg, a former Treasury official who’s now a senior fellow at the Center for a New American Security in Washington. At the same time, she said the U.S. has also sought to clarify to shippers that there are limits to the sanctions and they won’t be at risk if they avoid Iran-related business.

“The Treasury Department has gone to great lengths to explain the limitations of exposure,” Rosenberg said. “It serves the purposes of Iran hard-liners that this is vastly more aggressive, but that’s not entirely true.”

Another element of the plan is to target exporters of graphite electrodes and needle coke, two key components for steel-making, as Iran shifts its focus away from oil and toward metals in response to sanctions.

“The Iranians use evasive practices, and companies should be protecting their business and reputations through enhanced diligence,” Hook, the Iran envoy, said. “We have a very good idea of the entities and jurisdictions that are skirting our sanctions.”

Oil Cut

Hook displayed his penchant for unconventional approaches to enforcing sanctions earlier this year when he emailed the captain of an Iranian tanker carrying oil to Syria and offered him a multimillion-dollar reward to take the vessel to a port where it could be impounded by the U.S. The captain declined.

The Trump administration says sanctions have cut Iran’s oil exports by more than 2 million barrels a day and pushed oil revenue down by 80%. The new effort has the backing of Iran hawks in the U.S. who have long argued for more measures to limit Iranian revenue, regardless of the source.

“Petrochemicals are a major source of hard currency export revenue to Iran. Given that the oil shipments have dropped so radically, the U.S. is looking for non-oil export revenue,” said Mark Dubowitz, the chief executive of the Washington-based Foundation for Defense of Democracies. “While they’ve been putting sanctions on Iran, the real key is the enforcement piece.”

Dubowitz’s organization has proposed even further restrictions on how Iran spends its money as part of efforts to ensure that a future U.S. administration can’t undo measures imposed by Trump. The organization has submitted a memo to the State and Treasury Departments arguing that Iran should only be allowed to spend money currently sitting in overseas escrow accounts on humanitarian goods.

Photo: IRNA

U.S.-Sanctioned Cosco Unit Gets Two-Month Wind-Down Period

By Stephen Cunningham

Companies still doing business with a U.S.-sanctioned unit of China’s biggest shipping company have less than 60 days to wind down their transactions.

The temporary reprieve comes after last month’s surprise announcement of sanctions against the Dalian units of China COSCO Shipping Corp. caused freight rates to skyrocket as traders canceled charters linked to the parent company.

The U.S. on Thursday issued a license permitting activities deemed necessary to the “maintenance or wind down of transactions” with one of the units, Shipping Tanker (Dalian) Co., until Dec. 20, according to a statement.

Tanker stocks DHT Holdings Inc, Nordic American Tankers Ltd., Frontline Ltd. and Teekay Corp. fell following the announcement.

The Treasury Department sanctioned the Dalian units in September for allegedly hauling Iranian crude. Four other Chinese entities were also sanctioned at the same time. The penalties bar U.S. citizens and companies from dealing with the firms, effectively blocking them from American banks at the heart of the global financial system.

Tanker rates soared after the sanctions as shippers scrambled to find replacement ships, depressing refining margins and affecting normal crude flows around the world.

The sanctions also created uncertainty among among shippers on whether cargoes that had already been loaded onto the vessels of sanctioned firms could be delivered or not.

Photo: Fleetmon

Trump Says Iran Will `Suffer Greatly' If U.S. Is Provoked

By Margaret Talev in Washington D.C.

President Donald Trump warned Iran against a military provocation and said the country “will suffer greatly” if hostilities break out with the U.S.

“We’ll see what happens with Iran. If they do anything it’ll be a very bad mistake, if they do anything,” Trump told reporters on Monday during a meeting with Hungarian Prime Minister Viktor Orban at the White House.

“I’m hearing little stories about Iran,” Trump added. “If they do anything they will suffer greatly.”

Saudi Arabia claimed that two of its oil tankers were attacked on Sunday while sailing toward the Persian Gulf. The U.A.E. foreign ministry on Sunday reported that four commercial ships were attacked by an unknown adversary.

The precise nature of the incident remained unclear. Saudi Arabia’s state run Saudi Press Agency described it as “a sabotage attack.”

Iran’s Foreign Ministry Spokesman Abbas Mousavi described the maritime incident as “concerning and regrettable” and called for efforts to shed light on what exactly happened, the semi-official Tasnim News reported. He warned against “foreign seditious plots to upset the region’s security and stability.”

Tensions are rising between the U.S. and Iran after the Trump administration earlier this month ended exceptions to U.S. sanctions on Iranian oil sales. The Islamic Republic has threatened to block oil shipments through the Strait of Hormuz and has said it may increase uranium enrichment beyond limits allowed under the 2015 nuclear deal that Trump abandoned.

U.S. National Security Adviser John Bolton said last week that an aircraft carrier and bombers would be deployed to the region to counter unspecific Iranian threats.

Asked what Iran should be worried the U.S. might do, the president said: “You can figure it out yourself. They know what I mean.”

Photo: White House

Iran Calls Ship Attacks off UAE 'Alarming', Urges Probe

Iran on Monday called attacks on ships in the Gulf "alarming", after the UAE and Saudi Arabia said several vessels including oil tankers were damaged in acts of sabotage off the Emirati coast.

"The incidents in the Sea of Oman are alarming and regrettable," Iranian foreign ministry spokesman Abbas Mousavi said in an English-language statement on the ministry's website, calling for a probe into the attacks and warning of "adventurism" by foreign players to disrupt maritime security.

On Sunday, the United Arab Emirates said that four commercial vessels of various nationalities had been targeted by acts of sabotage off the UAE port of Fujairah. 

Saudi Arabia early Monday said two of its oil tankers were damaged.

Fujairah port is the only terminal in the UAE located on the Arabian Sea coast, bypassing the Strait of Hormuz, a global shipping route through which most Gulf oil exports pass, and which Iran has repeatedly threatened to close in case of a military confrontation with the United States.

The incident comes amid rising tensions between Iran and the United States which has strengthened its military presence in the region, including deploying a number of strategic B-52 bombers in response to alleged threats from Tehran.

It also comes as US Secretary of State Mike Pompeo scrapped a stop Monday in Moscow to visit Brussels instead for talks with European officials on Iran. 

Mousavi "called for clarifications" concerning the "exact dimensions" of Sunday's attacks on ships in the Gulf, the foreign ministry's statement said.

He said such incidents would have a "negative impact... on shipping safety and maritime security" in the Gulf.

He also "warned against plots by ill-wishers to disrupt regional security" and "called for the vigilance of regional states in the face of any adventurism by foreign elements", the statement added.

Photo: Depositphoto

Iran Looks to Remote Port to Beat US Sanctions

With the web of US sanctions tightening, Iran faces a host of challenges as it looks to an isolated port in the country's far southeast to maintain the flow of goods.

The port in Chabahar, only about 100 kilometers (62 miles) from the Pakistan border and located on the Indian Ocean, is Iran's largest outside the Gulf.

It is also the only Iranian port with exemptions from unilateral economic sanctions reimposed by the United States in 2018.

That is due mainly to the pivotal role of the port, and a planned railway line, in breaking landlocked Afghanistan's dependence on Pakistan for trade with the world, especially India.

Afghan trade as well as plans for a trading route by rail between central Asia and the Indian Ocean called the North-South Corridor are the main reasons the Islamic republic has invested one billion dollars in Chabahar's Shahid Beheshti port, official sources say.

"We will keep on developing this port... our rail network, road network and airport are all being developed, so that we can implement the North-South Corridor," Roads and Urban Development Minister Mohammad Eslami told AFP while visiting Chabahar for a development conference.

‘Traffic will Pick Up'

More than 200 hectares (almost 500 acres) of land have been reclaimed from the sea for the project and over 17.5 million cubic meters (618 million cubic feet) dredged, creating a 16.5-meter (54-foot) draught.

But more than a year since the new installations became operational in December 2017, business has yet to pick up.

The ships that officials say have docked in the past year have only loaded and unloaded 2.1 million tonnes of cargo, a far cry from the port's annual capacity of 8.5 million tonnes.

Only 20 ships have docked at the new section of the port and most of its three kilometers of waterfront remains unutilized, with new machinery and neatly lined-up cranes standing idle.

But authorities remain upbeat about the prospects for growth.

Hossein Shahdadi of the provincial ports and maritime authority said that in the first 11 months of the past Iranian year, which started on March 21, 2018, "there has been a 56 percent increase in cargo handled at the port compared with the previous year.”

"We've also had a 25 percent rise in the number of ships calling at the port" on the Gulf of Oman, he said.

Arun Kumar Gupta, managing director of India Ports Global Limited which has a 10-year concession at the new port, played down the startup issues.

"Any port will have a gestation period, there will be lulls but we are very sure that traffic will pick up," Gupta told AFP.

'Born with Sanctions'

The Indian company began work in December and has so far handled only an average of 60,000 tonnes of cargo per month.

But Gupta is counting on the port's proximity to India and Afghanistan to attract business.

Chabahar's location, however, carries its own risks as it lies in the volatile Sistan Baluchistan province where militant jihadists operate.

In December, a suicide attack on the local police headquarters killed two policemen.

During an investment conference in February, security was tight with many roads cut off and hundreds of armed security personnel deployed to protect delegates.

Apart from security concerns, US sanctions banning financial transactions with Iran make it ever harder to pay or receive payments.

Some like Afsaneh Rabiani, who runs a freight forwarding company, see Chabahar as an opportunity for "those willing to take the risk".

“I've been researching Chabahar for the past year and a half, and the infrastructure is now in place to do serious work here," she said.

As for the sanctions, Iran's roads minister said the challenge was nothing new.

"We were born with sanctions. Ever since the (1979 Islamic) revolution, we have been under sanctions and we are working on how to counter them," Eslami said, as he oversaw the unloading of a first shipment of Afghan goods lined up to be re-exported from Chabahar.

Photo Credit: IRNA

French Shipping Firm Drops Iran Over US Sanctions Threat

The world's third largest shipping container group, the French-owned CMA CGM, has decided to withdraw from Iran over the threat of US sanctions, its chief executive said Saturday.

"Because of the Trump administration, we have decided to end our service to Iran," Rodolphe Saade told an economic conference in Aix-en-Provence in southern France.

"Our Chinese competitors are hesitating a bit, so they may have different relationships with the Trump administration."

In 2016 the company signed a memorandum of understanding with the Islamic Republic of Iran Shipping Lines allowing it to lease spaces for vessels, operate joint shipping lines and cooperate on the use of port terminals. 

US President Donald Trump announced in early May the unilateral withdrawal of the US from the landmark Iran nuclear deal and the reinstatement of sanctions against the country, as well as against foreign companies who do business with it. 

Washington said the sanctions would be immediate for new contracts and gave companies already working there up to 180 days to cease trading. 

Photo Credit: Wikicommons