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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a maritime intelligence analyst
One of the many barriers to successful trade talks between Washington and Beijing is China’s reliance on Iran and Russia for its oil, and the dangerous, unregulated and illicit fleet of tankers that sail into its ports to deliver it.
Chinese refineries source about one-third of imported crude from Russia and Iran, undermining US President Donald Trump’s “maximum pressure” campaign against Iran and defying G7 sanctions against Moscow.
The size and scope of illicit shipping practices used by most of the roughly 700 ageing, anonymously owned tankers, and the escalating threat they pose to world maritime safety and the environment, should not be underestimated. This fleet has tripled in size since Russia’s full-scale invasion of Ukraine in 2022 and now accounts for as much as 18 per cent of all tankers trading internationally.
If Trump intends to make good on his threat to punish those buying Iranian oil, he must confront Chinese oil companies, traders and port authorities that fail to inspect, detain or prosecute tankers violating international laws or conventions.
Adding to the problem, sanctions have no real bite. More than half of all tankers shipping Iranian petrochemicals are now under sanctions by western countries. Well-entrenched workarounds have evolved over the past few years to avoid exposure to the US financial system, while shipowners, traders and charterers use regulatory arbitrage and operational subterfuge to move Iranian cargoes.
The UK is lobbying governments of countries such as Barbados, the Cook Islands, Gabon and Panama — all of which have opportunistically marketed their flag registry services — to de-flag sanctioned tankers, revoking permission for the vessel to fly their flag.
But as some of these nations start to take action, more ships are vanishing beyond oversight as owners turn to fraudulent flag registries instead. They use these to flag ships on behalf of countries — such as Guyana, Curacao, St Maarten and Eswatini — when they don’t have any permission to do so. Worse still, some continue to sail without authority under their former flag.
Since early March, the percentage of Iran-trading tankers and gas carriers using fraudulent flag registries has increased to nearly 40 per cent, from 30 per cent almost two months earlier. This leaves hundreds of ships flagless and invalidates marine insurance and certificates of safety and seaworthiness. Nevertheless, the rogue vessels sail on.
Countries seeking trade deals with the US may hold a bargaining chip of which they are not aware. By confronting the threat posed by unflagged tankers, they can simultaneously appease a mercurial, tariff-driven Trump administration, reduce seaborne flows of Russia and Iranian oil and make oceans safer.
For instance, there are dozens of falsely flagged tankers anchored in international waters off the Riau archipelago, unscrutinised by Indonesia, Singapore and Malaysia. There, they transfer or receive sanctioned oil cargoes. Other tankers anchor unchallenged in Emirati waters.
In European waters, a Russian fighter jet briefly entered Nato airspace on May 13 to defend a flagless Russia-bound tanker that Estonia’s navy unsuccessfully attempted to inspect. Many captains sail through the Danish Strait and English Channel laden with Russian oil while ignoring radio demands from coast guards.
The UN Convention on the Law of the Sea has shown that it is not sufficient to deal with such circumstances. And the UN’s International Maritime Organization failed in March to agree how best to tackle the spiralling use of fraudulent flag registries and unflagged ships. Diplomats were split along geopolitical lines: those supporting western sanctions on Russia and Iran, and those opposed.
Irrespective of breaking sanctions, these elderly, flagless ships and others using substandard flag registries are an oil-spill accident waiting to happen.