US and EU Look to Plug Loopholes in Iran Shipping Sanctions

An N.I.T.C. tanker like this would be tough to hide.

LONDON–The U.S. and the European Union are looking to close loopholes in sanctions designed to impede Iran’s oil exports after it emerged that Tehran is secretly using offshore tax havens to help ship its crude.

The National Iranian Tanker Co., the largest oil-vessel operator in Iran, is hiding some of the ownership of tankers it controls right under the nose of the U.S. in Central American tax havens, concealing their real nationality from flag registries.

The NITC, which says it was privatized 12 years ago, is considered a government entity by the U.S.

Tehran increasingly relies on tankers controlled by NITC to export its oil, which is the lifeline of its embattled economy. An EU ban on insuring Iranian oil shipments–effective since July 1–has forced the vast majority of shippers to stop carrying the country’s crude.

The measures, combined with a recent EU embargo on purchasing Iranian oil, aim to increase economic pressure on the country and limit its suspected nuclear weapons’ program.

However, evidence that Iran is navigating around existing oil shipping restrictions has prompted the EU and the U.S. to prepare new measures to tighten the noose on NITC’s ships. “This is a cat-and-mouse game being played diplomatically,” one U.S. Congressional aide told Dow Jones Newswires.

On Monday, the European Union will formally sign off a ban on the provision of flags to Iranian tankers and cargoes by EU nationals and EU companies even when operating outside the territory, an EU diplomat said.

The measure, which also bans classification–the clean health bills required to set sail–in the EU or by EU persons, is part of a broader package of sanctions on the Islamic Republic’s energy and financial sectors that was agreed in principle at a Brussels meeting Friday. The ban of Iranian ship flagging will start from Jan. 15, the diplomat said.

In Washington, leading congressmen are considering options either for future bills or recommendations to the U.S. government to close loopholes enabling Iran to flag its tankers, the Congressional aide said.

The Congressional aide said those mulling such proposals include Rep. Howard Berman (D., Calif.), the ranking Democrat on the Foreign Affairs Committee in the House of Representatives.

Washington can already ban any entity that helps to conceal Iranian ships from the U.S. financial system but the congressmen are looking at extra-territorial sanctions. These will focus on Iran oil shipping and be similar to those already in force against Iran’s banking sector.

One possibility being considered “would deny access to the U.S. to vessels from a registry that is abetting Iran,” the Congressional aide said.

The same far-reaching measures are being considered against insurers covering Iranian cargoes and so-called classification societies which survey them to ensure they are fit for sailing, he said. In most cases, those still dealing with Iran are based in Asia.

The moves could force registries to scrutinize the true ownership of ships they flag and not register them if they suspect they are Iranian.

Such effort comes at a time when Tehran is becoming increasingly sophisticated at evading scrutiny.

Earlier this year, the nominal ownership of at least seven NITC tankers was transferred to entities incorporated in the Caribbean tax havens of Belize and the British Virgin Islands–a U.K. dependency–according to the database of the International Maritime Organization and tax haven and shipping officials.

The IMO and other shipping databases, along with the U.S. government and NITC’s website, say the ships are still ultimately controlled by the Iranian company.

Jocelyn Acosta, who manages the Tanzanian shipping registry where the ships were flagged, confirmed that the seven ships were registered by Belize and BVI companies but said nothing in their application suggested an Iranian connection.

“Who the previous owner was, I am not allowed to know,” she told Dow Jones Newswires.

NITC’s shell companies pulled out of Malta and Cyprus in the spring because they would have been in breach of European sanctions banning Iran oil transportation, an NITC official said. Ironically, the move pushed the incorporation of Iranian ships geographically closer to the U.S.

Gian Gandhi, director general of the International Financial Services Commission of Belize, confirmed to Dow Jones Newswires that three companies named by the IMO as being under NITC’s control were registered on May 17.

“We were unaware of the fact that these companies had been formed to hold Iranian-owned vessels,” he said. “We are taking steps to have these companies struck off the registry as soon as possible.”

An official at Belize incorporation agent Remit Now International Ltd confirmed registering the three companies in the Central America country. But he said he was not allowed to name their owners.

Gary Wilson, the deputy head of enforcement at the British Virgin Islands’ Financial Services Commission, said it “will fully investigate…any breaches” by the companies in the BVI, which follow a EU ban on Iran oil shipping. But he told Dow Jones Newswires it was not clear if violations of BVI law had been committed.

Mrs Acosta said Tanzania is delisting all vessels alleged to be Iranian–including the seven registered in Belize and the BVI.

The moves come after Rep. Berman warned Tanzania’s President Jakaya Kikwete that the country’s U.S support would be in jeopardy if it continued flagging Iranian ships.

An NITC official said told Dow Jones Newswires that he didn’t know why the ships had been incorporated in BVI and Belize although he has previously said the company was having “no problem” in finding new flags.

-By Benoit Faucon. (c) 2012 Dow Jones & Company, Inc.