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Iran's seaborne trade suffers as sanctions mount

Monday, 13 February 2012 | 00:00
Iran's seaborne trade is withering as sanctions are stepped up against the Islamic Republic, freezing bank finance and deterring many international trade and shipping companies from getting involved in deals, industry sources say.
Much of Iran's imports, including food and consumer goods, are transported by sea via container and bulker ships. Oil tankers are used to ferry the country's vital crude oil exports.
But U.S. financial sanctions imposed since the beginning of this year to punish Tehran over its nuclear program are playing havoc with Iran's ability to buy imports and receive payment for its oil exports.
"Tougher sanctions are putting the squeeze on major Iranian commercial institutions," said Alan Fraser of security firm AKE.
"The net is closing in, and companies will be forced to take ever more elaborate measures to evade scrutiny. Iran's national shipping fleet is coming under ever more pressure as many states attempt to monitor its cargoes, while the role of the central bank as a middle man is becoming increasingly redundant in business transactions," he added.
Ship industry players say the move last month by the European Union to embargo imports of Iranian oil was already having an effect on shipping flows. European oil companies will be forced to sever all dealings in Iran crude by July.
"The objective of current and likely sanctions is very simple: to raise the cost of having anything to do with the purchase or shipping of Iranian petroleum to such an extent that even such potential partners who are formally beyond the legal jurisdiction of the United States or its allies will nonetheless shun doing business with Tehran," said J. Peter Pham, with the Atlantic Council, a U.S. think-tank.
A.P. Moller-Maersk told Reuters this week the Danish shipping and oil company had suspended new oil tanker deals with Iran due to the EU measures.
"The further EU sanctions on Iran contain an unprecedented package of prohibitions on the import, purchase and transport of Iranian oil that will affect our members' trading patterns," said Michele White, general counsel with INTERTANKO, whose members own the majority of the world's tanker fleet.
"With an ever increasing number of sanctioned entities who are subject to an asset freeze, we advise any of our members who might seek to continue to lift oil from Iran to exercise extreme caution."
Last year the U.S. blacklisted major Iranian port operator Tidewater Middle East Co, which operates seven terminals in Iran including Bandar Abbas. The EU followed suit last month, which industry sources expect will complicate ship container trades.
"Bandar Abbas is the only Iranian container port that is connected to the world's big line container ships or international carriers," said Jan Tiedemann, a shipping analyst with consultancy Alphaliner.
The world's largest container firm suspended operations last year at several Tidewater-controlled ports. Maersk line, a unit of A.P. Moller-Maersk, said it continued to operate a weekly feeder service calling at the smaller port of Bandar Bushehr to and from Jebel Ali in the United Arab Emirates. The port, some 900 km north of Bandar Abbas, is not managed by Tidewater.
"We do business in Iran in compliance with relevant foreign trade controls and sanctions," a Maersk Line spokesman said.
German container shipping group Hapag-Lloyd said on Thursday it no longer offered limited services to Iran. It had already ended consignments last year to Tidewater-run ports.
"Hapag-Lloyd doesn't accept any shipments to Iran anymore at the moment. This includes the feeder connection via the port of Bushehr - those were only very few boxes," a spokesman said, citing "the overall situation and development of sanctions."
IRAN's FLEET
Iran faces an even bigger challenge if measures being considered by U.S. lawmakers get passed. If approved, Iran's biggest tanker group, the privately run National Iranian Tanker Company (NITC), as well as state owned National Iranian Oil Company would face sanctions.
"The measure ... would amount to de facto oil and shipping embargos," the Atlantic Council's Pham said.
"The mere taint would also have a net negative effect on Iran, driving those fearful of the reach of sanctions to decide not to go through with transactions while giving Iran's remaining partners - one thinks, for example, of Chinese firms - the leverage to drive the price they pay down."
A senior ship industry source said a blacklist for NITC, which has a fleet of 40 oil tankers, would hit the group's crude transportation operations.
"Their ships will probably increasingly be used for floating storage in the Gulf, and people will probably not want to take delivery of Iranian oil on NITC ships."
NITC told Reuters last month it was a legitimate company and did not expect to be sanctioned, adding that while it had lost its insurance cover in Europe last year, the group's insurers mainly in Asia and Iran provided "good coverage.
The Islamic Republic of Iran Shipping Lines (IRISL) has been targeted since 2008. IRISL has said it is not state owned and denied it is engaged in any illegal activity.
"The names of ships have been altered to remove the Iranian-sounding names and allay suspicion; however it is unlikely that Iran's shipping trade will escape unaffected," AKE's Fraser said.
"The new sanctions may make it easier for individual ships to be tracked, making it harder for them to enter international ports without being flagged."
The growing restrictions are unlikely to force trade to stop, although making deals more complicated and expensive.
U.S. agribusiness giant Cargill told Reuters this week it planned to continue grain shipments to Iran.
"I sense that many international shipping companies are challenged beyond what they find can be justified when looking at the potential earnings of trading with Iran," said Jakob Larsen, a maritime security officer with BIMCO, the world's largest private shipowners' association.
"Having said that, I think there are still some who are able to carry on their business in a way that does not breach sanctions and yet ensures a decent return on investment."
Analysts said Asian countries, especially China and India, would continue to buy Iranian crude oil.
"For those countries not bothered by the prospect of Iran's alleged program to acquire nuclear weapons, continued consumption of Iran's oil - perhaps even at distressed prices -may even increase," said brokerage Poten & Partners.
Source: Reuters
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