US Treasury warns shipping industry against doing business with Iran and 'oil-for-terror' networks

US Treasury warns shipping industry against doing business with Iran and 'oil-for-terror' networks
Natasha Turak SEP 9 2019 https://www.cnbc.com/2019/09/08/high-alert-for-maritime-trade-amid-iran-...

DUBAI and ABU DHABI — Iran's Revolutionary Guard Corps and its external Quds Force are still moving oil worth hundreds of millions of dollars through sprawling illicit shipping networks, despite a maximum pressure sanctions regime from Washington and scores of corporate and government entities blacklisted.

Washington is working to crack down on this, the U.S. Treasury Department says, and it's warning those in the maritime industry to be wary of involvement with regimes or entities that have been deemed terror sponsors by the U.S. — or face steep costs.

Sigal Mandelker, under secretary for terrorism and financial intelligence at the U.S. Treasury Department, spoke to CNBC's Hadley Gamble during a visit to Abu Dhabi.

"What we're doing on this trip and really every day is we're telling the maritime industry that they need to be on high alert, they need to continue to sophisticate their ability to track vessels that are involved with any of these regimes," Mandelker said. "Whether it's Iran, Venezuela or North Korea, no one should want to have anything to do with funding regimes engaged in this kind of activity."

The conversation came just days after the Treasury Department's Office of Foreign Assets Control (OFAC) moved to designate 37 entities allegedly tied to Iran's Quds Force under Executive Order 13224. The order, first enacted under the Bush administration after the September 11, 2001 attacks, classifies relevant actors as specially designated global terrorists (SDGT) and gives the State Department and Treasury authorization to block their U.S. assets, prohibit Americans from transacting with them, and coordinate with other countries to cut off their funding sources.

Those designated last week include 16 entities, 10 individuals and 11 vessels which OFAC says were involved in illicit maritime trade linked to terrorism funding. Anyone owning or operating any of the designated vessels, any company that fuels them, and any port that allows them entry is also subject to U.S. sanctions.

"In this action, for example, we've exposed that this is an oil-for-terror network going to the Quds Force and Hezbollah, and no one in the world should have anything to do with that kind of network," Mandelker said.

"And here we've also sanctioned the captain. That should send a strong deterrent message to anyone considering manning one of these vessels that there will be real consequences to them if they continue." OFAC also warns of sanctions risks related to oil shipments to Syria, many of which come from Iran, tanker tracking data has shown.

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The U.S. has long designated the Iranian-sponsored Lebanese militant group Hezbollah as an SDGT under the order, and more recently brought Iran's Islamic Revolutionary Guard Corps into that group, the first time a government entity has been so designated -- leading Iran to in turn brand all U.S. military personnel in the Middle East as terrorists. Tehran rejects the U.S. designation, and has called Washington's sanctions "economic terrorism."

Ghost ships and the Adrian Darya 1
Iranian ships continue to make headlines, whether on or off the radar. To counter the U.S. sanctions on its exports, numerous Iranian oil tankers have become "ghost ships", turning off their satellite-tracking transponders to avoid detection and carrying out ship-to-ship transfers to move their oil while invisible to global tracking systems.

Thanks to dramatic improvements in satellite tracking technology, some of these movements are now being spotted, including that of the high-profile oil tanker Adrian Darya 1 — formerly named Grace 1 — which was seized by U.K. authorities on August 4 and accused of being en route to Syria in violation of E.U. sanctions. The vessel was released on August 15, against Washington's protests, after Iran promised that it would not sail to Syria.

The latest information publicly available on the Adrian Darya via tracking services indicates that it turned off its transponders after sailing toward the Eastern Mediterranean and is now anchored off the Russian navy terminal in Tartous, Syria, but has not yet offloaded its cargo of 2.1 million barrels of light grade oil. This would contradict previous statements from Iranian officials that the oil had been sold.

An Iranian foreign ministry spokesperson on Sunday told a local TV news station that the Adrian Darya had reached its destination, without specifying anything more than "Mediterranean sea shore," according to ship tracking firm TankerTrackers.com. The Iranian foreign ministry did not respond to CNBC's request for comment.

Mandelker did not elaborate on the U.S. response to the Adrian Darya specifically, but said the Trump administration's "maximum pressure" campaign was an effective disruption to Iranian oil exports that historically funded 60% of the government's revenue.

"We're just going to continue the work that we've been doing. I can't comment specifically on Darya, but our sanctions have served as a very big deterrent impact," she said. "The reason the trade of Iranian oil has gone down so significantly is because countries don't want to run afoul of U.S. sanctions."

Data intelligence firms report Iranian crude exports in August at between 100,000 and 200,000 barrels per day (bpd), a plunge from the approximately two million bpd it was exporting this time last year, before President Trump reimposed sanctions as part of his pullout from the 2015 nuclear deal.

"In spring 2019 alone, this IRGC-QF-led network employed more than a dozen vessels to transport nearly 10 million barrels of crude oil, predominantly to the Syrian regime," the Treasury Department wrote in a press release last week.

"These shipments, taken collectively, sold for more than half a billion dollars. The same network also sold nearly 4 million barrels of condensate and hundreds of thousands of barrels in gas oil, bringing in another quarter billion dollars."