Trump administration chases substandard flags in bid to thwart Iran’s shadow fleet

The latest American sanctions aimed at Iran’s oil industry make specific warnings to shipping about the use of substandard shipping.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) yesterday designated a China-based independent teapot refinery Shandong Shengxing Chemical for its role in purchasing more than a billion dollars’ worth of Iranian crude oil, as well as imposing additional sanctions on several companies and vessels responsible for facilitating Iranian oil shipments to China as part of Iran’s shadow fleet.  

“Any refinery, company, or broker that chooses to purchase Iranian oil or facilitate Iran’s oil trade places itself at serious risk,” said secretary of the treasury Scott Bessent.  “The United States is committed to disrupting all actors providing support to Iran’s oil supply chain, which the regime uses to support its terrorist proxies and partners.”

This also marks the sixth round of sanctions targeting Iranian oil sales since president Donald Trump issued National Security Presidential Memorandum 2 (NSPM-2), instituting a campaign of maximum economic pressure on Iran.

Newly sanctioned vessels include the Nyantara, Reston, Bestla, Egret and Rani.

OFAC also issued an updated sanctions advisory to assist the global shipping and maritime industry in identifying sanctions evasion practices related to the shipment of Iranian-origin fuel products while targeting known Asian insurers of shadow fleet vessels. 

Shadow fleet tankers rely on flag registries with lower operating and due diligence standards, OFAC warned yesterday, in advise that covered the rise of false flagged ships and fraudulent registries. 

“When vessels are registered by jurisdictions known to service shadow fleet vessels or have flown multiple flags in an uncommonly short period of time (e.g., three flag registration changes within a year’s time), maritime stakeholders, including charterers, shipbrokers, insurers and port agents and operators, should request additional documentation on the vessel’s ownership, voyage history, and flag history,” OFAC advised. This may include utilising publicly available resources, such as the IMO’s Global Integrated Shipping Information (GISIS) database, to determine if a vessel is flying a false or unknown flag.

In his first term, Trump withdrew the US from the Iran nuclear deal and reimposed a full embargo on Iran’s crude oil exports in 2019. As a result, Iran’s crude oil shipments collapsed from 2.5m barrels per day in the first half of 2018 to 250,000 barrels per day. During the Biden administration, sanctions were not as strictly enforced, and Iranian exports gradually recovered. In the opening months of Trump’s return to power, there have been many new sanctions packages aimed at Iran’s shadow fleet as well as Iran’s ties to the Houthis in Yemen.