Iran’s Oil Tanker Fleet Being Squeezed as Sanctions Bite

Besides the importance of oil for its budget, Iran is estimated to produce about 2.8 million barrels a day, more than 9 percent of OPEC’s output

FILE PHOTO: A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005.
\ Raheb Homavandi/ REUTERS

Iran is running short of options to replace its aging fleet of tankers and keep oil exports flowing because renewed U.S. sanctions are making potential sellers and flag registries wary of doing business with Tehran, Western and Iranian sources said.

Since U.S. President Donald Trump reimposed sanctions in November, exploratory talks with South Korea for up to 10 new supertankers have stalled and Panama has also removed at least 21 Iranian tankers from its registry forcing Tehran to put the vessels under its own flag, the sources said.

Washington has put restrictions on Iran’s port, energy and shipping sectors but it has given temporary waivers to the country’s eight biggest oil customers, which include China, India and Japan, so they can keep buying Iranian crude.

With oil exports accounting for an estimated 70 percent of Iran’s revenue, maintaining a fleet of enough tankers to store and move that oil is crucial for Tehran.

But potential sellers of vessels are more wary under the new round of sanctions after a Greek network that helped Iran buy tankers under previous restrictions was blacklisted.

“Iran has been looking for ships, but this time round it is going to be harder — there is so much more scrutiny now. It is going to take them longer,” one shipping source said.

Western insurers are steering clear of Iranian vessels and Iran’s attempts to export crude to the U.S.-approved buyers is further complicated by having to put its tankers under its own flag, rather than a third country such as Panama.

If Iran runs into difficulties exporting its oil it could have a significant impact. Besides the importance of oil for its budget, Iran is estimated to produce about 2.8 million barrels a day, more than 9 percent of OPEC’s output.

“Whatever sector you look at, companies will keep in mind being cut off from the U.S. financial system when deciding whether to trade with Iran,” said Mehdi Varzi, an independent oil consultant who has previously worked at the state-run National Iranian Oil Company.

Following the reimposition of sanctions, Panama, the world’s leading flag state for commercial shipping, decided to de-flag Iran’s ships, an Iranian official said. Shipping data shows nearly all Iran’s tankers had been registered with Panama.

All commercial ships must be registered — flagged in a particular country — partly to comply with safety and environmental laws.

A source at Panama’s flag registry said the cancellation “affects approximately 60 Panama registered ships that are related to Iranian and Syrian owners.” The source did not provide further details.

At least two other tankers registered to Panama — the Sarak and the Sobar — that were not previously considered part of Tehran’s fleet — were re-flagged to Iran this year. The owners of the vessels, who were listed in the British Virgin Islands, could not be contacted.

More than 20 other tankers in Iran’s fleet have been reflagged to Iran this year.

A U.S Treasury spokesperson said: “We intend to fully enforce these sanctions and we encourage the cooperation and compliance of our allies and partners.”

Having its tankers flagged in Iran presents problems for Tehran — even if it can secure more vessels and approved buyers for its oil, shipping experts say.

Besides China, India and Japan, Washington also gave South Korea, Taiwan, Turkey, Italy and Greece the green light to keep buying Iranian oil, although it’s unclear whether these waivers will be renewed when they expire in May.

Dealing with Iran’s flag registry raises compliance issues for counterparties as there is a risk they might interact with individuals or entities blacklisted under sanctions, shipping experts say.