Iran’s Oil Trade With China Rattled by US Sanctions on Tankers

Dec 2, 2024 (Bloomberg) – A broadening of US sanctions on tankers that haul Iranian crude has jammed a crucial cog of the trade, slowing the delivery of oil from the OPEC producer to its most valuable customer: China.

The flow of Iranian crude to China typically has two parts. Sanctioned tankers or those owned by Iran depart from the nation’s oil terminals, and then anchor off a midway-point in Southeast Asia, usually off Malaysia. Here, a ship-to-ship transfer takes place and a different tanker shuttles the oil to China.

However, penalties have swept up a number of vessels that previously carried cargoes to China. That’s forced some operators to shift away from this leg of the trade, reducing the number of available tankers transiting the route, according to ship-tracking data compiled by Bloomberg and people familiar who asked not to be identified as the matter is sensitive.

The outcome has been less Iranian crude at higher prices for China’s independent refiners, which take around 90% of Tehran’s exports. That’s prompted Chinese processors to seek alternative supplies from Africa and other regions in the Middle East, snapping up unsold oil from previous trading cycles.

The fear from operators with sanctioned ships is that the vessel will be turned away by port authorities, leaving them with the dilemma of finding a new home for the cargo, and bear the extra cost. The US widened sanctions to 20 crude-oil tankers on Oct. 11, and added another 12 to the list in the following weeks.

Often, tankers would traverse one part of the leg — Iran to Southeast Asia or Southeast Asia to China — according to ship-tracking data compiled by Bloomberg. This reduces the time a vessel travels without a cargo.
All but one of the tankers sanctioned on Oct. 11 have been active in Southeast Asian waters this year, with eight focused on transiting the route to China, ship-tracking data show. Some of those vessels are now switching their role in the Iranian crude trade.

The Shanaye Queen is emblematic of the change.

The tanker hadn’t sailed past the west of peninsular Malaysia since August 2023, instead loitering in waters to the east of the country, waiting to take cargoes of Iranian crude from other vessels to haul to China, according to data from Starboard Intelligence Maritime.

In October, the Shanaye Queen was added to US sanctions list, and the following month, started sailing west and is now in the waters near Iran, ship-tracking data show. The tanker was also renamed Marigold in November and now sails under the flag of Guyana, rather than Malaysia, according to maritime database Equasis.

By changing the vessel name and flag it sails under, ship operators are betting that the tactic will avoid scrutiny or raise suspicion at port inspections.

The Dimitria II changed its name to Hong Lu shortly before being sanctioned and previously shuttled between Southeast Asian and China. The ship began moving west of the Malaysian peninsula and turned off its transponder on Oct. 26, known as going dark, to avoid its movements being tracked.

Shanaye Queen’s owner, Shanaye Shipping Pvt Ltd. as listed on Equasis., doesn’t have a listed email address or phone number. Hunan Shipping Inc., the owner of Dimitria II, didn’t immediately respond to an email seeking comment. 

© 2024 Bloomberg L.P.Share

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