Chinese oil tankers are taking new steps to skirt United States sanctions on Iran, according to a report from The New York Times. Since US President Donald Trump restored sanctions over alleged nuclear violations, the US government has been actively threatening other countries and their businesses who continue to conduct business with Iran. While the nation’s exports have plummeted, sending its economy into a nosedive, Iran still has customers in China and India.
One such customer is Sinochem, a Chinese chemical manufacturer owned by the government. Although the company sold a majority stake of its shipping division in April, its ships transported Iranian oil both before and after the sanctions took effect. Sinochem’s sale of its shipping operations was likely influenced in part by the possibility of US penalties if caught dealing with Tehran. The Chinese company has strong roots in the US, owning 40 percent of a shale deposit in Texas and doing business with American titans like Boeing, Exxon Mobil, and Citibank.
When analyzing the correspondence from its ships, a pattern of deception and evasiveness became clear. While en route to Iran, the ships broadcast as any vessel normally would, reporting its heading, speed, and destination in addition to identifying itself. The International Maritime Organization lays out the rules which regulate the particulars of when a ship must transmit data and which details must be relayed. For most of their journeys, ships from Sinochem abide by these requirements.
However, as they begin to enter the Persian Gulf, they suddenly stop broadcasting. Under normal circumstances, a ship that stops broadcasting or “goes dark” would raise red flags. Perhaps it has experienced an electrical malfunction or worse, been raided by pirates and hijacked. In the case of Chinese tankers, there is little cause for worry though, as they magically reappear a few days later, leaving the Persian Gulf bound for China.
“They are hiding their activity,” said Samir Madani, co-founder of TankerTrackers.com. “They don’t want to broadcast the fact that they have been in Iran, evading sanctions. It’s that simple.”
Madani’s company utilizes satellites to visually identify vessels in parts of the world that have geopolitical value. This data is provided to industry professionals, journalists, and researchers. Naturally, Iranian ports are lucrative target to monitor for activity.
When questioned about Sinochem’s incredible disappearing ships, Chairman Frank Ning issued a blanket statement that the business had “adopted strict compliance policies and governance on export control and sanctions.” Either those policies were nonexistent or simply not followed because Iranian oil continued to flow into China via its ships.
At times, ship captains would go dark for up to 10 days, as was the case last October with the SC Brilliant. After they reappear heading in the opposite direction than they were prior to dropping off the grid, they are full.
“If the [automatic identification system] signal is lost, it is almost certainly because the A.I.S. transponder has been disabled or turned off,” said Court Smith, a maritime analyst. “The captain has decided to turn off the A.I.S.”
Without voluntary data from the ship captains, it is difficult to prove that these tankers are transporting sanctioned goods, outside the idea of physically boarding the ship and inspecting its manifest. This provides a layer of deniability for companies importing Iranian oil and petrochemicals. Most importantly, disabling identification transponders helps keep the threat of US retaliation at bay. For Chinese companies in particular, the danger of becoming a target of the Trump administration could destabilize their international businesses. The US government has already promised to take action against any country that purchases sanctioned Iranian products. At a time when the US and China are already locked in a trade war, adding more fuel to the fire is too risky for the Chinese.
Sinochem no longer owns and operates its shipping fleet, likely for good reasons. If it had continued to float under the radar and managed to get caught with sanctioned oil, its entire American operations would have been at stake. Now, a company called Inner Mongolia Junzheng Energy & Chemical Group Co., and two other Beijing entities run the shipping business.
While Iranian oil is incredibly lucrative now with steep discounts, importers pay a price by risking retaliation from Washington. Already, the Trump administration has proven how it can single out a company and cripple it as it has done with Huawei. As exports from Tehran continue to fall off, it appears more companies are determining it is simply not worth that risk anymore.