Sea Transportation: Modernized Multi-Scam Oil Smuggling


December 28, 2022: The United States Office of Foreign Assets Control (OFAC) is responsible for identifying shipping companies, port officials and others who are engaged in oil smuggling. Recently OFAC discovered another Iranian oil smuggling effort and seized the oil cargoes the tankers involved were carrying. The latest seizure involved Venezuelan oil that was smuggled using false oil origins documents, spoofing transponders (that report ship locations incorrectly) and painting over the tankers name. The operation was handled by a shipping company that had a clean record.

A decade ago, Iran began hacking the transponders tankers and cargo ships are required to carry. This was another technique Iran used to avoid international sanctions against selling their oil and importing certain goods. False documents and manipulating transponders was easier and less time consuming than earlir, and still used, methods like transferring oil cargoes at sea or some remote anchorage.

Iran is also using its smuggling skills, acquired over decades of beating American and UN weapons sanctions, to help sell its oil. The latest round of sanctions makes it much more difficult for Iran to export oil. This has caused Iran to come up with new methods to get around these prohibitions. While Iran keeps coming up with new methods to avoid sanctions, the impact of sanctions and sanctions enforcement have greatly reduced Iranian oil income. The latest sanction method, denying ship and cargo insurance to ships engaged in smuggling, worked for a while but soon methods to get around that were developed. The basic problem is that there is a lot of money to be made, and little personal risk, for those coming up with new oil sanctions evasion techniques. There are thousands of tankers involved, along with hundreds of shipping companies as well as port authorities. Smugglers have a financial incentive to find who is willing to take risks in return for a lot of cash.

Early on the Iranians offered deep discounts to buyers willing to engage in illegal methods to avoid detection and sell Iranian oil. This is sometimes very risky, for those who get caught can be prosecuted, jailed, and fined. But Iranian smugglers know who is willing to take chances if the payoff is large enough. Selling oil at discounts of 30 percent or more still costs Iran. So also does the expense of secretly buying tankers that will pretend to belong to another country while moving the black-market oil. Iran kept coming up with new methods to conceal the smuggling, like modifying location transponders all seagoing ships must carry to provide false GPS locations.

The U.S. and the UN soon discover new techniques and must come up with ways to make these methods more difficult to use. This is an increasingly competitive game of cat and mouse. While Iran smuggling has been successful when moving items (like weapons components) that could be hidden in a cargo container, oil is another matter. Iran has experimented with using shipping containers to smuggle oil but this is very inefficient and you can still get caught. Iran fears that between the CIA (photo satellites and spies) and the maritime insurance industry (that monitors world shipping via transponders and other sightings), it will be very difficult to move the illegal oil. How difficult varies depending on how long it takes for the sanction enforcers to detect the new technique and disrupt or eliminate it.

One of the more successful evasion techniques was confusing the international ship tracking system. These “maritime security technologies” were developed as a safety feature and have proved valuable, providing the positions of ships caught in storms or taken by pirates. AIS (Automated Identification System) and INMARSAT (International Maritime Satellite) were originally developed to make it easier for ships to track other nearby ships at sea. AIS is essentially an automatic radio beacon (transponder) that, when it receives a signal from a nearby AIS equipped ship, responds with the ship's identity, course, and speed. This is meant to enable AIS ships to avoid collisions with each other. INMARSAT is a more elaborate and longer-range system. It enables shipping companies to keep track of their vessels no matter where they are on the planet. INMARSAT uses a system of satellites which transmit AIS-like signals to anywhere on the oceans. It only costs a few cents to send an INMARSAT signal to one of your ships and a few cents more to receive a reply. All ships now use GPS coordinates to record location. Iran often just has two ships trade INMARSAT IDs while they are near each other, leaving the U.S., or anyone else checking INMARSAT data, unable to track ships that have been switched.

These two systems are now required by law (international agreements) for all sea going vessels greater than 300-tons. The technology has worked, and the U.S. Navy has found them particularly useful in counter-terror operations. Coast Guards the world over found these tracking systems a big help. But apparently pirates and smugglers gained access to the systems via bribes or theft and an increasing number of smuggling efforts have been helped by technology meant just to safeguard ships at sea. Iran, and other nations involved in smuggling learned how to have INMARSAT send false signals concealing where a ship is. This can work for a while but the United States with lots of recon satellites, warships, and cooperation from most of the world’s shipping can get around this.

The Iranians are aware of the satellites and other means of double-checking transponder data and constantly come up with schemes to confound the American snoopers. Since Iran has been under sanctions for decades for being an outlaw state, threatening more punishment is seen more as a challenge not a threat. This works both ways because a lot of this illegal oil income goes to finance Iranian terrorist operations overseas in places like Syria, Lebanon, Iraq and Yemen.




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