Is Malaysia helping Iran skirt oil sanctions?

Despite the expiration of oil waivers on May 5, 2019, Iran continues its candid attempts to export oil to China and appears to be getting critical assistance from Malaysia. According to Tanker Trackers Founder Samir Madani, Iranian oil tankers are arriving in specially designated transfer areas in the busy Straits of Malacca shipping lanes, under Malaysian jurisdiction. Via “ship-to-ship” (STS) transfers, the oil is then transferred from the Iranian tankers to Chinese-owned Floating Storage Units (FSU) – stored for later pickup – or conveyed immediately to Chinese ports in Very Large Crude Carriers (VLCC).  Moreover, the STS process is occurring with the aid of Malaysian tugboats, whose job is to help maneuver the large tankers into adjacent positions for the oil transfer.

Two recent voyages taken by Iranian tankers provide further indications of Malaysia’s possible involvement.

First, the sanctioned National Iranian Tanker Company (NITC) oil tanker FELICITY.

FELICITY departed from the UAE on May 7, 2019, to load crude oil from Iran on June 22, 2019. Its “draft” – indicating how high a vessel is in the water and a measure of how much cargo is on board – was 11.0. This indicates that FELICITY was empty of oil.

After switching off its Automatic Identification System (AIS) transponder – which marks the position of a vessel and is crucial for informing maritime authorities and other ships, for obvious safety reasons – on May 8, 2019, FELICITY reappeared on June 24, 2019, off the UAE coast. This time its draft was 20.3, meaning it had fully loaded with oil.

(Sources: Bloomberg L.P., Mapbox, OpenStreetMap)

FELICITY again turned off its AIS on June 24, 2019, “going dark” for two weeks and reappearing on July 5, 2019, with a reduced draft now at 10.6.  (Iranian vessels routinely switch off their AIS to “go dark” and throw trackers and authorities off the scent as they evade sanctions). FELICITY’s position was indicated as at anchor near Malaysia’s Port Dickson. In switching off its AIS for those two weeks, it is plain FELICITY did not want scrutiny of its movements. But by comparing the previous high draft of 20.3 to the new low draft of 10.6 two weeks later, it would appear that at some point between June 24 and July 5, 2019 FELICITY unloaded its oil in Malaysian waters.

(Source: MarineTraffic)

Another sanctioned NITC vessel carrying out suspicious activities in Malaysia is HUMANITY. On April 12, 2019, HUMANITY loaded crude oil at Kharg Island, Iran. Its draft was 20.2, indicating it was fully laden with oil.

(Sources: Bloomberg L.P., Mapbox, OpenStreetMap)

On April 17, 2019, HUMANITY turned off its AIS for ten full days. Then on April 27, HUMANITY switched on its AIS and, like its sister ship FELICITY, appeared near the Malaysian coastline. However, unlike FELICITY, HUMANITY then sailed directly on to China and discharged a small quantity of its oil, as indicated by a draft change to 18.0.

(Sources: Bloomberg L.P., Mapbox, OpenStreetMap)

After this seemingly small discharge in China, HUMANITY then reappeared (with AIS switched on) on July 2, 2019, anchored at Port Dickson, Malaysia. But this time its draft was 10.6, suggesting HUMANITY may have unloaded the bulk of its oil in late June, again in Malaysian waters.

(Sources: Bloomberg L.P., Mapbox, OpenStreetMap)

Although circumstantial, the foregoing seems to corroborate claims that Iranian tankers are discharging oil through STS transfers in Malaysian waters, which is then going to China.

The fact that both vessels were anchored near Port Dickson in Malaysia is also notable. There are two oil refineries located there that could be potential recipients of Iranian crude oil from Iranian tankers: Hengyuan Dickson Refinery, a subsidiary of China’s Shangdong Hengyuan Petrochemical, and Petron Malaysia Port Dickson Refinery, operated by Petron Malaysia Refining.

That Malaysia is hosting and facilitating this Iran-to-China oil transfer and evading sanctions is not surprising, given Kuala Lumpur’s historically friendly ties with Tehran. Indeed, just last month on June 22, when asked which side might be responsible for an escalation of tensions in the Persian Gulf, Malaysian Prime Minister Mahathir Mohamad was clear that it was America, not Iran, that was “making all the provocation…” Given comments like that, UANI will continue to monitor Malaysia’s role as a conduit for Iranian oil exports.