Iran hunts for more ships to keep its oil flowing
LONDON/DUBAI: Iran is discreetly scouring the globe for second-hand oil tankers to replace its ageing fleet and keep crucial crude exports flowing as US sanctions start to bite, Iranian and Western sources said.
Since US President Donald Trump reimposed sanctions in November, exploratory talks with South Korea for up to 10 new supertankers have stalled, Panama has removed at least 21 Iranian tankers from its registry and Tehran is now looking for extra vessels in places such as Vietnam, the sources said.
Washington has put restrictions on Iran’s port, energy and shipping sectors but it has given 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 per cent of Iran’s revenues, maintaining an effective fleet of tankers to store and move that oil is crucial for Tehran.
But potential sellers of used vessels are more wary this time round after a Greek network that helped Iran buy tankers under previous sanctions was blacklisted. Western insurers are also steering clear, complicating Iran’s attempts to export crude to US-approved buyers.
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 per cent of OPEC’s output.
“Whatever sector you look at, companies will keep in mind being cut off from the US financial system when deciding whether to trade with Iran,” said Mehdi Varzi, an independent oil consultant who has previously worked at the staterun National Iranian Oil Co.
Israel warned this month that its navy could take action against Iran, which it said was smuggling oil using clandestine measures similar to those employed during the previous round of sanctions.
According to maritime specialists, methods used for skirting sanctions in the past have included changing the names of ships, switching off AIS (Automatic Identification System) location transponders and conducting ship-to-ship transfers of oil.
Since the previous round of sanctions in 2012, ship tracking has become more sophisticated and more available.
Washington has also cracked down on more Iranian networks, making it riskier to get involved with Iran, according to bankers.
Iran reached an agreement with world powers in 2015 over its nuclear programme which led to the lifting of sanctions in 2016 but Trump pulled out of the deal in May last year and reimposed US restrictions in November.
“Many big oil traders are very worried about going into Iran due to Trump, and even the Chinese are trying to comply with what the Americans want,” said Varzi, who is based in Britain.
A senior Iranian official played down the threat to its oil exports because of pressure on its fleet.
“Plenty of countries are happy to do business with Iran,” the official said. “As we have done in the past, there are several ways to overcome the shortage, including using tankers of other countries.”
A second Iranian official said discussions with South Korea over the possibility of ordering as many as 10 supertankers, each able to carry up to 2 million barrels of oil, had been delayed by US sanctions.
“We are working on it,” the official said.
A South Korean government official had no comment on the matter.
After Western sanctions were lifted, Iran also started talks with South Korea’s Daewoo Shipbuilding and Marine Engineering Co about forming a joint venture to establish a shipyard in Iran.
A spokesman for Daewoo said it signed a preliminary agreement with Iran in December 2016 to cooperate on developing the shipyard, but said no progress had been made since then. A third Iranian official said talks were still ongoing.
According to one shipping source, Iran has been searching for more ships in places such as Vietnam and two sources said it had also been looking for middlemen in the Greek market, one of the main hubs for secondhand ship deals.
“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 of the shipping sources said.
When asked about Iran’s efforts to secure ships, a third Iranian source said they were looking at all options.
Vietnamese officials did not respond to requests for comment.
Iran has more than 50 tankers, but needs them for both transporting oil and storing unsold stocks in its territorial waters – given its limited onshore storage capacity.
Data based on AIS tracking by shipping intelligence platform Marine Traffic showed 12 Iranian tankers, or more than a fifth of its fleet, were being used for floating storage in March.
Whatever sector you look at, companies will keep in mind being cut off from the US financial system when deciding whether to trade with Iran. Mehdi Varzi, independent oil consultant