Iran sanctions: STS transfers

Iran sanctions

Published: 16 January 2015

Tanker operators should take note of the recent targeting of ship owners as part of attempts to export crude oil originating from Iran in breach of applicable sanctions by means of ship to ship (STS) transfers at Khor Fakkan in the UAE. Several attempts have been made to export Iranian oil to destinations which do not benefit from a waiver under US National Defence and Authorisation Act (NDAA) legislation.

It appears that such oil may routinely be described as being of Iraqi origin and as having been loaded on board the transferring ship at Basra a couple of days before the proposed STS operation. However, any such documentation should not be taken at face value. It is alleged that the supplying ships loaded the cargo in Iran before shuttling across the straits of Hormuz to supply ships with oil - ostensibly from Iraq - destined for countries that do not benefit from a waiver under applicable US sanctions legislation.

Members are reminded that the Rules of the Club exclude the provision of cover or the payment of a claim where otherwise the Club or the managers or reinsurers would be subject to the risk of sanction or prohibition. Members should also be aware that the transport of Iranian oil to states which do not benefit from a waiver under US law may trigger enforcement action against the ship, its owners and related parties by the US authorities.

There is evidence of a sophisticated smuggling operation and those responsible may go to considerable lengths to disguise the true origin of the cargo. Cargo documentation is likely to appear credible and there may be no evidence of any designated parties being involved. Members are therefore advised to exercise extreme caution when engaging in STS operations in the Arabian Gulf. In particular it is recommended that members check with port agents to ensure that ships providing cargo by means of an STS transfer in the region loaded the cargo at the port stated in the cargo documentation before any cargo is received. It is also advisable to ensure that charter parties contain an appropriate sanctions clause.