Iran General NewsIran shippers face difficulty dodging sanctions

Iran shippers face difficulty dodging sanctions

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Wall Street Journal: Officials from landlocked Mongolia said they would cancel the flag registrations of five Iranian cargo ships, providing a window into the cat-and-mouse game played by international authorities that are trying to curb Tehran weapons programs and by Iranian companies trying to work around them. The Wall Street Journal

By BENOÎT FAUCON in London and COLUM MURPHY in Shanghai

Officials from landlocked Mongolia said they would cancel the flag registrations of five Iranian cargo ships, providing a window into the cat-and-mouse game played by international authorities that are trying to curb Tehran weapons programs and by Iranian companies trying to work around them.

The move on Thursday came days after officials in another inland nation, Moldova, told The Wall Street Journal it had deregistered 12 Iranian vessels in July and no longer has any Iranian vessels on its registry, to come into compliance with international sanction restrictions.

Government officials said and international shipping databases show state-controlled Islamic Republic of Iran Shipping Lines, or Irisl, repeatedly shifted flag registrations of a number of vessels in recent months to different small inland nations.

The moves are an expected consequence of United Nations and U.S. sanctions, a company executive said last week.

“When you push someone from a room, he should find a door,” said Ali Ezzati, Irisl’s manager for strategic planning and international affairs, on the sidelines of a shipping conference in Xiamen, China. “If he can’t find a door then he should try to find a small hole.”

Mr. Ezzati declined to answer subsequent questions about the registries of Irisl’s ships. Contacted by email, Irisl declined to comment.

Mr. Ezzati said shifting the flag registrations had complicated, but hadn’t stopped, the company’s ability to operate.

The U.N. has alleged Irisl helped Iran’s military program, and placed sanctions on the company. The U.S. also has sanctioned Irisl, alleging it provided logistical services to an Iranian military department that oversees the country’s ballistic-missile program, and thus helped Iran’s nuclear program.

Irisl denies any connection to Iran’s elite Revolutionary Guard Corps, and Iranian officials say the nation’s nuclear program is aimed at peaceful uses.

The complications are considerable, too, for any country that registers the ships, as they would risk being exposed to the sanctions, particularly a ban fromaccessing the U.S. financial system.

Ships might fly a flag provided by different countries as proof they are safe and legal—and in compliance with the host country’s shipping standards. Many register with what are known as flags of convenience outside their home country at the request of banks, because it guarantees neutrality in case of a legal disputes, as well as for tax or labor-related reasons.

The sanctions give Iranian shipping companies additional reason to register their ships elsewhere. Erich Ferrari, a Washington, D.C.-based sanctions lawyer at Ferrari & Associates, said shipping under and Iranian flag would make any trade with other nations “easier to detect.”

The Islamic Republic has struggled to find ships to import cereals and other basic goods. A dozen foreign-flagged ships carrying food and other non-oil goods had to stop entering Iranian ports earlier this year because of fears that paying local ports operators and banks would breach sanctions. The sanctions are tied to money transactions with bank and trade services.

According to shipping database Equasis, at least 10 general cargo carriers controlled by Irisl received Moldovan flags this spring. Databases like Equasis rely either on information supplied by shipping registries or by the ships themselves.

Moldova said on Tuesday it had de-registered a dozen Iranian vessels in July. The move was meant to comply with the U.N.’s sanctions, Radu Bezniuc, an adviser on transport issues to Moldova’s prime minister, told The Wall Street Journal.

At least three of the ships that lost their Moldovan flag have resurfaced in recent days with radio-identification numbers indicating they are registered in the inland Asian nation of Mongolia, according to the databases.

On Thursday, Mongolia joined Moldova in deciding to bar the Iranian vessels. “Today we decided to cancel the registration” of the ships, said J. Jambajamts, deputy director-general of the Mongolia Maritime Administration in Ulan Bator, the capital. He said there were five ships involved, registered over August and September. Mongolia operates a registry center in the city-state of Singapore.

The U.S. embassy in Mongolia referred questions to the U.S. State Department, which acknowledged it has pressed countries around the world to abide by steepening sanctions against Iran.

A spokeswoman for the U.S. State Department, without directly commenting on whether it had contacted Moldova and Mongolia on de-registering Iranian ships, said it has “engaged successfully with a growing number of governments on this issue.”

“We continue to inform potentially susceptible flag states of the reputational and financial hazards of doing business with the Iranian maritime industry,” the spokeswoman said.

U.S. Treasury officials declined to comment on specific actions.

A nonprofit group called United Against Nuclear Iran, begun by a former U.S. and international intelligence and security officials, also has adopted the cause of preventing Iranian vessels from sailing under foreign flags in a broad-based campaign to pressure Tehran. The U.S.-based group has pressed other countries, including Moldova, to cancel ship registrations. A spokesman wouldn’t say whether the group has pressured Mongolia.

Mark Wallace, a former U.S. ambassador and CEO of UANI, said that the group was aware of Iranian ships bearing Mongolian registrations and that it has been planning to lodge a protest with the Mongolian government.

“We applaud the Mongolians’ decision to reconsider their policy mistakes,” Mr. Wallace said Friday.

The group also has pressured financial institutions to stop business dealings with Iran.

Both the U.S. and Iran have courted mineral-rich Mongolia. Earlier this month, Mongolian president Tsakhia Elbegdorj traveled to Iran, where he visited a uranium-enrichment plant. U.S. Secretary of State Hillary Clinton visited Mongolia in July, when she referred to the former Communist country as “an inspiration and a model” for democracy in Asia.

The registrations have likely been costly to Irisl. Registrations can cost tens of thousands of British pounds and can take some months, said Nigel Kushner, chief executive of London-based law firm W Legal Ltd. and an expert on Iran sanctions.
—Jay Solomon in Washington contributed to this article.

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