The United States on 5 November imposed sanctions on Iranian container line Islamic Republic of Iran Shipping Lines (IRISL) and oil transport giant National Iranian Tanker Company (NITC).
The sanctions are part of what the US Treasury Department’s Office of Foreign Assets Control (OFAC) said was its largest-ever single-day action targeting the Iranian regime after it sanctioned more than 700 ships, individuals, entities, and aircraft.
US Secretary of State Mike Pompeo announced eight jurisdictions – China, Taiwan, India, Japan, South Korea, Turkey, Italy, and Greece – that have been given waivers, allowing them to continue to import Iranian oil.
The waivers run for 180 days, but the United States will allow them to be renewed after that time.
Commenting on the waivers to China and India, Ralph Leszczynski, head of research at shipbroker Banchero Costa, told IHS Markit that neither country had anything to gain by supporting the sanctions.
“Iran accounts for 10% of India’s crude oil imports. India could find alternative supplies from other parts of the Middle East or from the United States,” he said.
“But it would come at a cost, both in terms of higher oil prices compared with the favourable terms it gets from Iran and in terms of higher shipping costs as they would inevitably be longer-distance shipments compared with Iranian exports. Also, if India were to stop or significantly reduce imports from Iran, it would complicate the strategic relationship it is trying to build between the two countries, putting in jeopardy projects such as Chabahar Port in southeastern Iran, which India sees as both an entry channel for Afghanistan and a counterbalance to the nearby Chinese-built Gwadar Port just across the border in southwestern Pakistan.
“Therefore, India has really nothing to gain and a lot to lose in implementing sanctions on Iran and will try all it can to resist it. India, the second-largest importer of Iranian oil, has already said it will continue importing oil from Iran as it does not recognise sanctions imposed by anyone other than the United Nations.”
Indian refiners have announced purchases of oil from Iran for November at levels similar to those in October, despite the start of the sanctions on 4 November.
“It is likely that India and Iran will agree to use rupee payments instead of USD payments, something already tried between 2013 and 2015, so that Iran can then use rupees for the import of food, medicines, and other commodities from India. The oil will also almost certainly be shipped on a CIF [cost, insurance, and freight] basis using Iranian tankers,” Leszczynski added.
The US sanctions are intended to disrupt Iran’s ability “to fund its broad range of malign activities and place unprecedented financial pressure on the Iranian regime to negotiate a comprehensive deal that will permanently prevent Iran from acquiring a nuclear weapon, cease its development of ballistic missiles, and end its broad range of malign activities”, the OFAC said.
Under the 5 November sanctions, the OFAC has targeted 65 IRISL subsidiaries and 122 ships in which it has an interest.
The OFAC said one IRISL subsidiary, Valfajr Shipping Company, has regularly been used by Iran’s Islamic Revolutionary Guards to transfer passengers, cargo, containers, and personnel from Iranian ports controlled by the corps to major ports in the Gulf region.
“Another IRISL subsidiary, Hafez Darya Arya Shipping Line, has shipped cargo to at least one known cover company for Iran’s Defense Industries Organization”, which has previously been sanctioned “for engaging in activities that materially contributed to the development of Iran’s nuclear and missile programmes”, the OFAC added.
It added that IRISL subsidiary Safiran Payam Darya Shipping Company shipped more than 136,000 tonnes of Iranian light crude oil from Iran to Syria in 2017.
The OFAC has also targeted 37 NITC-affiliated entities and vessels in which NITC has an interest, as well as 52 ships identified as being NITC property.
Justifying the sanctions against NITC, the OFAC said, “Each year, these vessels move tens of millions of barrels’ worth of Iranian oil, as well as Iranian natural gas, which constitute a major source of revenue to fund the Iranian regime’s malign activities. It is essential to close off this funding stream to Tehran.”
The companies include several that are registered in Germany and China, such as Eighth Ocean, Eleventh Ocean Administration, and Shanghai-based Esail Shipping.
The OFAC added that the Iranian shipping industry was reviving previously employed deceptive practices in a bid to obfuscate IRISL’s and NITC’s interests in vessels and other property.
“Among the IRISL vessels identified today are four vessels that recently underwent name and partial ownership changes but are still property in which IRISL has a blockable interest,” the OFAC said.
“The global maritime industry should be on alert for Iran’s use of such tactics and make every effort to thwart Iran’s use of its jurisdictions to create front companies, to revoke its flags from IRISL and NITC vessels, and to deny other means that enable Iran to conceal its interest in the vessels.”
While NITC is likely to ship Iranian crude to China, India, and other jurisdictions under the waiver programme, the OFAC warned potential suppliers, such as bunker companies, that they could also become US targets in follow-up action under the latest sanctions.
“As a result, the knowing provision of significant financial, material, technological, or other support to, or goods or services in support of, these entities could be sanctionable,” the OFAC said.