How Iran is using 'ghost ships' to flout Donald Trump's oil sanctions

It sounds like something out of a pirate story, but the normally staid world of international trade has been beset bya flotilla of ghost shipsin recent weeks, and they're weighed down by several million barrels of trouble forU.S. foreign policy.

Iran is one of the world's biggest oil suppliers, and according to official records, the country shipped about 1.8 million barrels of oil per day last month, a slight decline from August's level and 40 per cent below a peak of almost 3 million barrels in April.

All things being equal, that figure is likely to plunge even more in the coming weeks, as U.S. sanctions aimed at forcing Tehranto negotiate a new nuclear agreement are set to come into force next month. If fully implemented and adhered to, the sanctions willcut Iran's oil exports to zeroas long as the rest of the world plays along.

But the Iranian governmentseems toalready have found innovative ways around those efforts by moving millions of barrels of crude on the sly.

People who monitor global tanker traffic noticed a curious new development last month, as abouta dozen tankers known to be carrying Iranian oil mysteriously turned off transponders designed to track their movements via GPS.

Under an international law known as the International Convention for the Safety of Life at Sea, ship captains must keep theirtransponders known asAutomatic Identification System or AIS on at all times. But sometimes vessels wishing to move about without as much scrutiny will turn them off, and so far the international community doesn't seem too interested in stopping them

Iran has lately become a hub for the tactic. And the journey of one ship, the Dino I, is a good example of how it works.

On Sept.4, AIS data shows that the supertanker picked up 2 million barrels of Iranian oil at Kharg Island, a massive fill-up station in the middle of the Persian Gulf. From there, the ship made its way through the Strait of Hormuz and into the Indian Ocean, where the shipwent dark from Sept.15onward.

It reappeared on the grid more than ten days later while passing through the busy shipping lanes nearKuala Lumpur, Malaysia, and its transponder stayed on while itpaid a visit to the shipping hub ofSingapore a day later, on Sept.27.

Then it vanished again for more than a week,before reappearing off the coast of Taiwan on Oct.5.It then went dark for another few days before checking in off the South Korean coast and delivering its cargo at the Chinese port of Dalian on Oct.13.

Dino I is notthe only such "ghost ship," as experts have called them,and the eyebrow-raisingvoyage seems part of a targeted attempt to evade the coming sanctions.

"They think they'll throw people off the scent [and] they want to confuse what they're picking up,"saysDavidAdesnik, research director at Washington, D.C.-based national security think-tank the Foundation for Defence of Democracies, of what the ships are up to.

"We're still puzzling through their precise motives," he says, "butbroadly speaking, it's about the money."

The threat of Iran being locked out of the oil market has pushed up oil prices in recent weeks. So deployingan armada of cloaked tankers allows Tehran's leaders to have their cake and eat it too by selling just as much oil as ever.

"They're doing it more because they embraced the media narrative that exports are down hard," says SamirMadani, co-founder of ship monitoring firm TankerTrackers.com. "It helps boost the price of oil. They don't want OPECto go into higher production," he says. OPEC refers to theOrganization of Petroleum Exporting Countries, a producers' cartel that includes Iran as a member.

In the first 13 days of October, TankerTrackers calculated that Iran shipped an average2.2 million barrels per day. That'san increase of 10 per cent from what the company was seeing in September, and several hundred thousandbarrels more than what's being reported in the official numbers from OPEC.

Madani's firm supplements rudimentary AIS data with other technology to fill in the gaps, and he estimates that official numbers sometimes only captureabout 20 per cent of the tanker traffic at any given time. "The other 80 per centis a cat and mouse chase involving satellite imagery," he says.

This isn't the first time that Iran has tried such chicanery. Iranian ghost ships last criss-crossed the seas to this extent between 2011 and 2015, when the previous U.S. administration had sanctions on Iranian oil before signing the nuclear deal that the current inhabitant of the White House pulled out of.

It's not just oil destined to feed China's voracious appetite for fuel, either. Madanisays Syria and Israel"both instruct tanker operators to switch off their transponders prior to arrival." Officially, there are U.S. sanctions on selling oilto Syria, but Iran shipped up to 60,000 barrels per day to Syria in August, worth some $150 million, TankerTrackers says.

In Israel's case, tanker operators bringing oil from Arab states who don't have relations with Israel will turnoff the tracking devices to keep up appearancesthat they aren't "dealing with the Jewish state,"Adesnik says.

Ghost ships aren't the only type of subterfuge currently at play in the oil market. Madani has noticed a marked uptick in the amount of barrels that Iran is storing in idle tankers. That's a great way for the regime to get oil off of its official ledgers, until it can find a buyer on the sly in future, he says.

On the last day ofSeptember, for example, Madani'ssatellites witnessed 10 million barrels sitting in six supertankers floating just offshore of KhargIsland. They hadn't moved in days, nor did they move for several days following.

That's more than10 per cent of all the oil the world consumes every day, just floating around, looking for a buyer possibly one who's willing to do business even after U.S. sanctions are in place next month.

"It would seem to be practice," Adesniksays. "They'll really need the cloaking after November 4,but they're practicing with it now."

The risk isn't only financial. In January, Iranian tanker the Sanchi burned and sank in waters 300 kilometres east of Shanghai after colliding with a freight ship. The Sanchiwas carrying about a million barrels of condensate at the time, and all 32 members of the crew are missing and presumed dead. Rescue efforts were hamperedby the fact that the Sanchihadn't broadcast an AIS signal for at least ninehours prior to the collision, Adesnik says.

Tragedies like the Sanchi are likely to repeat for as long as the international community is willing to turn a blind eye to the shipping subterfuge. Tehran has anincentive to keep doing it and"authoritarian regimes are not known for their ability to confront the truth in an expeditious manner" Adesnik says.

"I'd imagine we're interested in taking some pretty serious measures to prevent them from getting oil out illicitly," he says. "But we have to prioritize who we're going to be pressuring into compliance."