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Iran is using a little-known port of Labuan off the East Malaysia coast to hide millions of barrels of oil from Western sanctions, according to shipping data, industry sources and officials.
LABUAN, Malaysia -- Iran is using a little-known port off the East Malaysia coast to hide millions of barrels of oil from Western sanctions, according to shipping data, industry sources and officials.
A Reuters examination of shipping movements and interviews shows how Iranian crude is shipped to the area and loaded on to empty vessels at night to await potential Asian buyers. Storing the oil on hired tankers operating under the Panamanian flag in the calm waters off the tax-haven port of Labuan -- an offshore financial center about the size of Manhattan -- means Iran can keep its fleet active and ensure the flow of oil money into its struggling economy.
At least two large oil tankers have been unloaded this way in recent weeks and several more Iranian vessels were steaming toward Asia, according to Reuters Freight Fundamentals, which tracks the movement of the global tanker fleet. One was destined for a Chinese port, while three others, carrying as much as 6 million barrels of crude or fuel oil, were sailing to unknown destinations.
Iran would like to shift more oil to what is effectively a mobile storage depot off Malaysia's coast over the next few months, said an industry source familiar with Iran's planning who didn't want to be identified due to the sensitivity of the matter. But it is struggling to find shipowners willing to offer vessels for storage.
While not illegal, the dead-of-night transfer of oil in the South China Sea illustrates the lengths to which Iran will go to keep exporting its oil to skirt Western sanctions aimed at pressuring Tehran's suspected pursuit of nuclear weapons. A European Union oil embargo has virtually halted access around the world to insurance for Iranian crude and oil products.
Doing business with Iran's oil industry carries reputational and financial risk and the threat of losing insurance coverage.
No-man’s land
Less than 6.2 miles from the coast of Borneo, Labuan is sheltered from typhoons and is typically used to park unwanted ships rather than store expensive oil. People in the industry say this makes it an ideal place to blend or rebrand oil as non-Iranian and resell it under the radar of sanctions enforcers in Washington or Brussels.
"Labuan is like a no-man's land. There's no reason to be paying attention to Labuan," said a Singapore-based source familiar with floating storage operations in Southeast Asia.
Related story
Iran sanctions exceed expectations, but still don't change Tehran's behavior
The insurer of one of the storage ships that took oil from an Iranian tanker said it had been informed of the transfer by the British government on Aug. 16, and was looking into the matter.
Reuters
Click to see full-size diagram of how the oil shell game works.
With fewer customers, Iran has cut its oil output and almost halved exports from around 2 million barrels per day last year. The Labuan scheme means Iran can use its own tankers to move, rather than store, its oil. In April, shipping sources said more than half of Iran's tanker fleet was anchored in the Gulf just holding some 33 million barrels of oil - worth around $3 billion at today's prices.
Malaysian and Iranian officials did not respond to requests for comment for this article.
China, India, Japan and South Korea, which together buy over half of OPEC member Iran's crude exports, have all imported less this year, winning waivers from U.S. sanctions. Those waivers are up for renewal later this year, so buyers are careful not to be seen to be increasing imports from Iran again.
‘In the dark of night’
Last month, the Lantana, a tanker operated by the National Iranian Tanker Co. (NITC), transferred its cargo of around 1 million barrels of crude oil to the Titan Ruchira, a floating storage vessel, off the tiny tropical island of Pulau Kuraman near Labuan, port and shipping industry officials said. Around Aug. 10, another Iranian tanker, the Motion, discharged as much as 2 million barrels of fuel oil onto the Titan Tulshyan in the same area, said the officials.
The two ships are among 58 Iranian-owned vessels blacklisted by Washington in July for assisting in Iran's oil trade. Those measures bar U.S. companies and Americans from doing business with the ships.
"Our vessels are there and, as we understand it, there are no issues," a source familiar with NITC tanker chartering told Reuters.
A third NITC tanker, the Justice, had been heading for Labuan, but shipping data shows it changed course and should arrive at the Chinese port of Dalian on Sept. 17. Another tanker, the Pioneer, had been expected in Labuan early this month, but has anchored off the southwest Malaysian coast.
"That (Lantana) operation took place literally in the dark of night. They didn't even use a proper operator with experience to carry out the STS (ship-to-ship transfer)," said an East Malaysian-based shipping source. "The authorities were aware only after the fact."
Iran declined to sell the stored crude to a Chinese trader who offered $54 a barrel - only around half the price of Iran's cheapest heavy crudes - said a source familiar with those discussions.
Complex web
The two Titan vessels are owned by offshore companies linked to Singapore-based Tulshyan Group, which hired them out in 2010 to Hong Kong-based Titan Petrochemicals under a five-year bare boat charter -- an arrangement where Tulshyan has no staff managing or operating the vessel. Tulshyan, which shares a Singapore office with Titan, said it was not aware that the cargo on its ships was Iranian.
Titan, battling a shipping industry downturn caused by a glut of tankers, high bunker fuel prices and a shaky global economy, has struggled to meet charter payments to Tulshyan, according to a person familiar with the matter. Heavy with debt and with five straight years of losses, Titan is being sold to Chinese oil trader Guangdong Zhenrong Energy Co Ltd., whose parent, Zhuhai Zhenrong, is blacklisted by the United States as the biggest supplier of refined petroleum products to Iran.
Titan hired out the two tankers to Glammarine, a little-known shipping company that only recently registered in Labuan. Glammarine took the two ships under a six-month charter, with Titan's crews running the vessels' day-to-day operations and Glammarine taking responsibility for finding the cargo and paying for use of the ships.
"This was the first business we've done with Glammarine ... (and) there were no red flags raised (about them)," Titan director Augustine Cheong told Reuters in Singapore. "The due diligence we took was to check if they are legally incorporated. And it's on a time charter, so we have our own crew on board and can see if they're doing something wrong." Cheong said Titan would drop the charter to Glammarine if the oil was found to be Iranian.
Glammarine officials declined to comment. A visit to a listed Labuan address for Glammarine given in business registry documents found a rundown building in a neighborhood once used to house workers at a now defunct milk factory. The premises were closed.
Paper trail
Glammarine agreed to let a company called Account International Safe Oil use the Titan Ruchira and Titan Tulshyan to store 4 million barrels of Iranian oil, shipping sources said. Account International is not registered in Malaysia or Hong Kong, and Reuters was unable to find an address for the company or contact staff for comment. Buyers of Iranian oil in China, India and Japan said they had not heard of the company.
A Middle East industry source familiar with the company said Account International was an affiliate of the National Iranian Oil Co. A second source based in East Malaysia said the firm had business links to HK Intertrade, a Hong Kong-based firm sanctioned by the United States in July for operating as a front company for Iran.
"HK Intertrade purchases oil from NIOC and resells it to companies like Account," another southeast Asia-based shipping industry source said.
The ships' managers from Titan were not aware that the crude and fuel oil transferred from the Lantana and Motion were from Iran, Cheong said. "We requested BL (bill of lading) documents. We were told the cargo was from India ... and we believed they were ex-NITC tankers," he added. "We only operate the ships as the ship manager. We don't own the cargo."
A source familiar with the operations of the Titan Ruchira said the cargo was declared as Iranian to port officials in nearby Sabah. Customs officials in Sabah did not respond to Reuters emails. But in signed shipping documents seen by Reuters, Account International listed the 1 million barrels of crude oil unloaded by the Lantana as Indian.
India, though, doesn't allow the export of domestically produced crude. Nor did the Lantana call in at India on its journey to Malaysia that began at Iran's crude export hub at Kharg Island, according to Reuters Freight Fundamentals and industry sources in both India and the Middle East.
Account International also indicated on shipping documents seen by Reuters that the fuel oil on the Motion was from Fujairah, a major transhipment and storage hub in the United Arab Emirates. Shipping data shows the Motion did stop in Fujairah, but began its trip in Iran.
Insurance risk
The Titan Ruchira is insured by the North of England P&I Association, which said it was looking into the matter after being informed of the transfer off Labuan by London last month.
Western insurers underwrite around 90 percent of the world's tanker fleet, and are currently barred from covering ships carrying Iranian oil.
"There is a risk ... a vessel providing storage services for Iranian oil would breach European sanctions laws," said Mike Salthouse, director with North Insurance Management, which acts as manager for the North of England P&I Association. "I say a risk because sanctions as currently drafted appear to target the insurance of the transportation of Iranian oil and not the provision of insurance to facilities storing such products."
The insurer declined further comment on its investigations.
The Titan Tulsyhan is among some 7,000 vessels covered by Gard, the world's second-largest marine insurer.
"Gard takes very seriously any suggestion that it is in breach of any international sanctions and is conducting an investigation," it said in a response to Reuters queries. "Gard can, and will, withdraw any insurance cover if it believes sanctions are being breached."
Rakesh Tulshyan, head of the Tulshyan Group that owns the two Titan vessels, said that if there is "concrete evidence that it's Iranian oil", he will seek to have it removed from his vessels.
"Because of my reputation, I would rather not do any business with links to sanctioned countries," he told Reuters.
Reporting by Luke Pachymuthu in Labuan, Malaysia; Randy Fabi and Manash Goswami in Singapore, Nidhi Verma in New DelhiI, and Jonathan Saul in London.
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Leave a Comment:
Now there's an idea!
I wonder if anyone has ever considered what would happen to the US if the world ganged up on us, put illogical sanctions on just about EVERTHING we export, and banned us from receiving imports...
It's called KARMA, and at some point, you'd have to forsee the possibility of China and Russia banding together, and convincing all the middle sized nations who've been sort of our allies to join their side, and bully us out of existence.
and thats all this is, straight up BULLYING.
we are the nation that invades and occupies, bombs and kills...WE are worse than any nation this planet, if we want to get blunt. but we dont, we're the @!$%#s who think EVERYONE ELSE is the problem, when it's always been us...always.
With gas at $4 a gallon America still exports and recently increasingly exports oil and refined product. That what the Keystone pipeline is all about, exporting refined product. It is no accident that the oil is that pipeline as proposed is not going to the closest refineries but to the gulf. It is no accident that instead of building new refineries in the midwest they want to ship it all the way to the gulf. We the US taxpayer will pay for that pipeline and get no benefit.
Jessica, the answer to your question is simple. The U.S. would be fine and the rest of the world would suffer.
You are forgetting one extremely important factor. We produce more than half of the worlds grains. We are the worlds bread basket. Without us they starve. Without them, we would be forced to use our own resources, which we do have in abundance. Sure prices would go up because we wouldn't have the cheap labor that we get from places like China and India, but we are fully capable of making everything ourselves. We are the most resource rich country on the planet.
However, they export it after refinement.
That sentence is misleading.
AG...the same thing thing occurred to me. The Keystone pipeline is designed to get Canadian / Dakota crude to the WORLD markets. American companies are starting to press the government for permission to build LNG terminals on the East / Gulf coast to handle Marcelleus Shale gas for export. What happened to "drill, baby, drill" and American , or at least North American "energy independence"?
When do corporations get permission to start to shipping Great Lakes water overseas???
Wow those sanctions are really working!!!
Jessica,
Easily done. Manufacturing would be back in the US, albeit some higher prices for American made goods, but taxes might go down since we would probably have records set for low levels of unemployment and welfare, etc costs would go down.
The rest of the world? They would be starving as we produce over 50% of the worlds food supply. So people around the world would be dying of starvation while we throw food away in the garbage.
Thank you author for this important information...
Recalibrating missiles....
.
LOL @ US1776..recalibrating missles..funny thing is..I bet they really are doing that!
No wonder we are sending a lot of Naval ships to the south China sea.
They play this shell game to give the ship owners just enough cover to claim that they did not know or that their is no proof of the oil's origin. This is just one more example of why the sanctions do not work, there are too many unscrupulous people out there who will do anything to make a buck.
What most people do not realize is that the US does not need foreign crude oil. We are actually a net exporter of oil and have been for a number of years. We import crude from the Middle East while at the same time exporting Alaskan oil to Japan and other countries. We also import oil, refine it, and then export it again. The US could be energy independent tomorrow if we just stopped exporting oil.
Well, there are many ways to skin a cat.
There are just as many greedy business interests in SE Asia as in the US. Let Israel remove the Iranian threat and things will quite down.
Give it some time, I bet some of those underwater drones in development would be pretty effective at disabling those ships without destroying them or dumping their contents in the ocean. Just a small shaped charge on a screw shaft or rudder.
I agree with you Brian, sanctions are a joke. There are always different ways to get around things.
Rontran, You are also correct. Let Israel take care of themselves. They are a sovereign nation and we have no right to tell them when to go or not to go to war.
Sancions are isolationist. They seldom solve problems and mostly affect the little people both sides i.e. higher fuel prices for us and a weaker economy for them. Time to put an end to our interventionalist foreign policy and quit sticking our nonses where they don't belong.
Well, duhhhhhhhh! They had to be getting from some place and it took this long to figure it out.
What do we pay intelligence for?
To scare us to give justification to bully the rest of the world.
And gosh oh gee, look who figured it out! And it wasn't the intelligence weenies, either! It was the (whisper it) private sector.
Bob - are you admitting our military is just as inept as the rest of our govt?
you'd be right, and thats why we should defund the entire thing...who needs govt anyway?
gosh oh gee. who says that?
No jessica the only inept person is you. I guess we would be so much better off if you were running our government and military. If you say we are the worse nation on earth then why dont you take your miserable life some where else to live, lets say "Iran" and start complaining about thier government when you get there.
Thank you Roger, couldn't have said it better myself. Jessica is as anti American as the empty suit in the WH and his minions.
You people who call others Un American when you disagree with them makes me want to puke. You and your phony patriotism.
It's obvious sanctions aren't enough. If Iran's nuclear program has nothing to hide, then why play these games in the first place? Things are going to get real ugly after November.
oil laundering lol
Let's see...........if 2 tankers possibly sold oil out of 58 that are sanctioned, then that means a 97% success rate. I'm sure some dumbass will still say the sanctions aren't working, but ya just can't fix stupid!
Yeah, Boy! Those Obama sanctions sure have crippled Iran!
If they weren't working they wouldn't have to go to such extremes to sell oil would they?
Extremes or not they're not working. Iran is on the verge of nukes and our enemy, the Chinese are violating an embargo they agreed to. Hopefully Israel, not being run by spineless cowards like Obama will sink a few tankers and that will be that.
"Spineless cowards" are those who have strength and bully others, they are cowards and would be murderers. Those that have a backbone look for other ways to peace.
How is stepping up the effort to get Bin Laden and act of cowardice? How is upping drone attacks a show of weakness.
What you suggest is just dangerous. You think by sinking their tankers it will all just end there? No, it wont. What you will achieve by doing that, is ramping up yet another conflict for our troops to die in. Even more so if Romney gets elected.
I for one, am tired of constantly burying troops because some ignorant U.S. resident (see above), or some politician that owes his defense contractor buddy a favor, thinks it's the righteous thing to do.
Do me a favor and keep your balls in your pants unless you are ready to join the front lines after your proposed sinking of a few tankers.
A real coward is someone that calls for an act of war from behind their keyboard.
Why are some people not satisfied unless we are constantly at war?
Stopbs... Channelling your inner Neville Chamberlin again?
No, channeling rational behavior. By the by, Hitler was Jewish and Christian, allegedly. As you might have fathomed, your name is evidently an antonym for Romney; shows a complete lack of understanding of "lies".
No Jeff, Iran is not on the verge of nukes and if Israel sinks a couple of tankers, it will be an act of war. War is something Iran has not statred in almost 200 years, Jeff. Why acn't you get that fact into your empty skull?
All our intelligence agencies and even Israeli intelligence agencies, agree with my statements.
I wonder how much Romney has parked there?
I wonder how much O's contributors have parked there or have you conveniently forgotten all the Hollywood elite, hedgefund mgrs, and corps that support him? My guess is PLENTY. Stop being so petty and jealous of people that have money they EARNED or aren't you getting enough from picking the pockets of the taxpayers?
None of the contributors to either Romney or Obama are running for president are they? I could care less about how much money someone has, I supported Kerry and he has a lot more but we all know how he got it and if he parked money offshore we know it was his money can you say the same about Romney? And there's a big difference between simply keeping money in foreign banks and creating shell companies and advertising those companies to foreign investors as ways to invest in the U.S. without paying U.S. taxes as Romney did. Hard to prove how he earned it when he won't show his taxes. If he earned it at the expense of companies he gutted or illegally he doesn't deserve to be president and probably won't be. All he'd have to do is show his taxes and if his money was merely in foreign accounts there'd be no issue. The fact that he won't indicates there's far more to it than that.
@ Larry,
The bigger question is how many do the Koch brothers have there?
We are the problem for peace in the world not Iran. I don't know of any countries that Iran has attacked while I can think of several off the top of my head that we have attacked. Who is the dangerous one. I'm not worried about getting killed by the actions of Iran I am more worried about getting killed due to the actions of our own government by continuing to try to tell everyone else in the world how to live their lives when we can't run our own affairs.
Iraq. Iran and Iraq have had a long standing feud going back to when Iran was Persia.
Obviously the top of your head doesn't extend very far. First off you have to understand the history of Persia/Iran, which I'm sure you don't but go educate yourself Dave before you reply to me. Let's just throw this one out first; how many countries were affected by Lockerbie?
I could go all the way back to pre-biblical times, but I'll just breeze over a few notable conflicts since 1700 AD and call it fair.
Iran invaded Georgia, Armenia, and Azarbaijan until Russia took them back. Iran again invaded said 3 countries pushing all the way into Russia in 1826, so here you have Iran instigating a conflict with a world power at the time and invading their homeland. They invaded Afghanistan shortly afterwards and were pushed back by British forces. In 1941 they attempted to build a supply line to extend the reach of their military and Nazi Germany and were once again interrupted and pushed back by British and Russian forces. And lastly in 1971 they seized a chain of islands in the Persian Gulf that were disputed territory between Saudi Arabia, Iraq, and other countries. They seized the islands with military force and quickly established military bases that remain until today.
So Dave, just because they fail at most their invasions, doesn't mean they aren't invading. I'm not saying Iran is a war-monger, most countries today have similar histories, and your assumption that they don't attack other countries is completely incorrect.
Are you for real 1826? I am 55 yrs old so in my lifetime Iran hasn't attacked another nation. How many have we attacked since 1957? We are still the number attacker of nations in my lifetime.
dave:
What country do you live in?
Arizona Tumbleweed
Love this one Arizona
Falling back on you are not patriotic, you are un-American, you are a commie, you are a socialist, you are not god fearing enough AND the Earth was made in 1 day and is flat
The standard argument from a person like you when you are lost for reason. Looks to me you are the typical "red neck" that most of the world thinks of Americans.
What else can we expect from somebody that comes from south of the mason-dixon line
Yes I am "for real" Dave. Why'd you pick 1826 instead of 1941 or 1971? Did I ever say America doesn't attack other countries? Simply pointing out how incorrect you were in saying Iran doesn't. Because you were indeed, extremely incorrect.
It's like stumbling on a legal drug ring.
Its not a secret anymore Iran....
No not a secret and it's not a secret that we won't do anything.
Put a reef in the empty tankers way. It's an ecology thing.
I like the part of the article that mention that Iran refused to sell at $54.00 USD/barrel to a Chinese trader.
I love to be a fly on the wall and listen to a negotiation between an Arab and a Chinese on the oil's black market, specially one of this caliber!
Sounds like predator Vs alien to me..........Lol :))))
If we had Iran's oil on the markets, gas prices would be down around 2.70 a gallon. Alas, paranoid dis-illusionists run our country now. We swear, all of them are smokin weed in Washington.
Sounds like a job for the SEALS - place charges on the ships and sink them in the harbor.
Please state your source. Did we not have cheaper oil this last summer? No Iran oil during peak season when normally there is a traditional incease in price during the summer months - but wait it did not happen. Life is simple for simple minds!
Hah USAF RET, I was going to ask the same thing then saw you already did +1.
And Dave the liberal idiot voices his "govenment is after him theories again and again." "Our government sucks, its too mean, we pick on the world, we are the bad guys" and wah wah wah. And Iran is a peace loving nation not exporting terror and weapons to Syria and Iraq. Jesus go live there if you love em so much.
You people and your phony Patriotism.
Jessica: It's pretty hard to bully a country with over 3000 deliverable nuclear weapons. The USA could also reassemble over 30,000 nuclear weapons just as could Russia. USA would retaliate and WWIII would be under way. Your talking Armageddon then and the end of the world as we know it. Nuclear blackmail isn't going to work until Russia and China find a way to realistically stop ALL 18 Trident subs from unleashing their salvo of up to 2000 MIRV's (14 missles of 8 Mirv's each). Since those subs can stay under water for years if necessary and are thousands of feet under the ice caps it's nearly impossible to locate them.
Hire some pirates and hijack the oil tankers and have them sell the tankers to the highest bidder.
Solution:
Send a predator over Iran. Take some pics of the ayatollahs and Ahmedinijad out on a stroll...
When nut job is in NY, have Hillary hand him an envelop with the pictures and a note that says ... "next time it will be a hellfire missile, not a kodak camera. Have a nice day! Shalom."
I read all the posts and agree with some and disagree with others. One thing i can say with almost certainty is the fact that some are claiming ignorance. "They didn't know it was Iranian oil". B.S.!!!!!!!! Everybody knows when a vessel is coming, where it is coming from, and what is on board. I only say this because i work at one of our nation's port authorities. These vessels do not just come and go like a canoe. There is an incredible amount of paperwork, documents, etc, before heading into open sea destined for a port of call in another part of the world. What a bunch of liars. "They didn't know!!!!!". C'MON!!!!!!!! They ALL knew!!!!!!! Money talks LOUD. (especially in these times) Time to give the Malaysian government a little phone call. BTW, sinking them will NOT be a good idea. Keep the pressure on EVERYBODY involved in helping them. EVERYBODY.
I bet if you sink a few of those Iranian vessels the oil flow would stop. Why have sanctions if you're not going to enforce them.
Who will do the enforcing ? The US ? Only to be condemned by the United Nations ???
Embargo malaysia too.
So it seems that the Panamanian Government is operating in cahoots with the Iranians.....
Maybe someone should talk to them about the seriousness of this whole thing..I always thought the Israelis had some influence there.....
Also, where are those pirates when you really need them? These ships would be great "pirate bait"....
Somalia - I say send 'em over!!!
Man....these guys think they are pretty darn slick(no pun intended) .......We all knew they would find a way around the sanctions. As long as the demand exists, they will have friends willing to go out of there way to accommodate them ....The sanctions will not work.
PV, the sanctions are working, hence the reason for this article. Did it ever occur to you that they wouldn't go to this much trouble to try and export 2 tankers of oil, if the sanctions weren't working? Beside, they are 58 tankers under sanctions, and 2 might have sold some oil...97% success rate sounds like it's working pretty well to me!
LMAO -- you must be a comedian -- and a libbie, still shilling for the empty suit in the WH. Makes me sad that you're a floridian.
I'm a Floridian too......and it also makes me sad. They will find a way to get that oil to their consumers. The sanctions are like a piece of gum on a leaky dam ....lol
Fla
Sanctions are not working. The goal is to get Iran to stop their nuke program and there are no signs that they are about to do so and not much time.
Since they found a way around the sanctions, how about a submarine and TORPEDO????
Always a loophole to be found and exploited. I used to say,"let's put all criminals on an island with 1 mos. supply of food and water, and a loaded pistol each. They'll take care of each other and save the rest of us some money." Now I say basically the same for all other countries. Let them battle each other and fend for themselves. In the meantime, we could save alot of soldiers' lives and money, by taking care of ourselves instead of taking care of the rest of the world; who doesn't even want us around to begin with!
lets send some pirates there. We could have all the oil and get ransom money for the boat. Then those rag heads will send us the boat back again with more oil.
Obama says, give us some time for sanctions to work. Yeah, right. A) we don't have a lot of time and B)they are not working. C) Sanctions have never worked to stop a nuke program.