Let’s plug the sanctions gaps that enable Iran to sell oil to China and Venezuela

For all the sanctions on Iran, Tehran has secured willing customers for its crucial oil and gas exports in the world’s leading authoritarian and communist regimes: Venezuela and China. Caracas has taken a creative route, first paying gold for oil and then bartering its own heavy crude for Iranian gas condensates. Beijing, by contrast, pays cash straight up — $280 billion in 2019, followed by a deal worth $400 billion this year. Naturally, this illicit trade weakens efforts to compel Iran to moderate its destructive behavior and end its pursuit of nuclear weapons, potentially harming U.S. interests and national security. 

Yet Iran’s success in courting Venezuela and China does not mean that U.S. sanctions have failed. Sanctions have forced the regime to trade with a few like-minded authoritarian regimes. And crucially, sanctions have forced Iran to go to extraordinary lengths to conceal its illicit shipping commerce: satellite tracking deceptions, doctoring of records, flag- and name-switching, physical camouflage, and a host of other maritime violations.

With a better understanding of the shipping subterfuge, the U.S. and its allies can make the whole rogue enterprise prohibitively costly for all parties, plugging enforcement gaps and truly squeezing Tehran. 

For instance, FELICITY was the first Iranian-flagged vessel to load Venezuelan crude, according to TankerTrackers.com. It reportedly journeyed to Venezuela’s Jose Anchorage using subversive and illegal techniques, including a shutdown of its tracking beacon. Before arriving in Venezuela, FELICITY was last seen via its satellite transponder 13 months prior in Taizhou Anchorage in China, according to Marine Traffic — meaning that the vessel sailed all the way to Venezuela with its transponder off. Disabling the transponder is a favored tactic to obscure the movement of goods, but it’s also a dangerous violation of International Maritime Organization safety rules. FELICITY even turned to more rudimentary methods to hide its activities — undergoing a fresh paint job in Venezuela.

Vessels moving Iranian oil carry falsified records that attest to their cargo originating in countries such as Oman, the United Arab Emirates (UAE), Iraq and Malaysia. By engaging in ship-to-ship (STS) transfers of oil from Iranian-flagged vessels to tankers owned by non-Iranian firms, Iran can obscure the origin of the oil and gas, as well as the trade itself for its customers. STS transfers are often preceded by vessels “spoofing” their location to fake their position, sometimes by thousands of nautical miles, creating yet another dangerous situation.

Smaller and under-resourced nations are routinely duped into the illicit trade by foreign-flagged rogue vessels, such as those included in Iran’s “Ghost Armada,” our organization, United Against Nuclear Iran (UANI), has found. These national flagging authorities are often unable to adequately patrol the activities of their flag-bearers, and so are targeted in order to fulfill ship registration requirements. Ships that are part of the Ghost Armada repeatedly switch flags, change names and alter their physical markings. 

When advocacy groups such as ours notify maritime authorities of illicit activities of registered vessels, we find that most are eager to comply with U.S. sanctions. Some even have come to rely upon nongovernmental organizations (NGOs) to serve as their eyes and ears. Through our work, dozens of vessels have been stripped of their flags, making it more difficult to continue their subterfuge.

The whole gamut of shipping deceptions perpetrated by commercial facilitators and their enablers must be made far more costly — prohibitively so. As a first step, we recommend the Treasury Department broaden the scope of sanctions-triggering activities that constitute “significant support” to Iran’s shipping sector. The U.S. should punish bunkering specialists, port authorities, importing agents, management firms, charterers, operators, marine insurers, classification societies and all other “maritime services providers” involved with Iran. The Treasury also should expand and delineate the range of sanctionable maritime services and work to identify and target any Venezuelan or Chinese firms complicit in smuggling. 

Sanctions have slowed the flow of foreign capital and reduced Iran’s trading partners to the worst-of-the-worst. But U.S. sanctions are only as robust as the enforcement mechanisms that come with them. Iran and its dubious allies are perpetuating a vicious cycle that undermines global compliance and further allows the Iranian regime to continue its destructive and malign behavior. A sharper focus on the specific methods and their perpetrators is needed to cut off Iran’s oil spigot.

Daniel Roth is the research director and Claire Jungman is the chief of staff of United Against Nuclear Iran (UANI), a nonprofit, nonpartisan policy organization based in New York that was formed in 2008 to combat the threats posed by the Islamic Republic of Iran.