Published on Oct 21, 2011 by Luke Hunt
AsiaWATCH — In the second installment of a four part series Luke Hunt examines the regional response to Iran’s national shipping company and the issues created by sanctions against the Islamic country. Parts of this article has appeared in previous publications.
Twenty Hong Kong companies were linked to Tehran’s weapons build-up and the territory says it is striving to pass laws that would allow it to seize Iranian-linked assets.
Typically each company is responsible for one vessel.
Japan, the European Union, Canada, Australia and the United States have all passed laws enacting sanctions, some have gone further.
South Korea temporarily closed 102 companies believed helping Iran’s nuclear program including the Seoul branch of Bank Mellat, responsible for exports to Iran. It has also been sanctioned by the US and EU as an IRISL lender.
Even older Iranian allies from within the Organization of Islamic Conference are distancing themselves. Indonesia has told Iran not to proceed with its weapons program while Malaysia has signed off on its Strategic Trade Bill and signaled a change in stance, backing sanctions.
The bill will enable the authorities to crackdown on companies and seize material bound for export that could be used in Weapons of Mass Destruction. Kuala Lumpur had previously been forced to repudiate allegations it was aiding Iran’s nuclear program.
WikiLeaks cables named two Malaysian companies — Electronic Components and Skylife Worldwide – for possible breaches of sanctions, acting as front companies for Tehran.
“As members of the UN Security Council southeast Asian states are obligated to comply with its resolutions. But capacity and political will are areas that often inhibit compliance. Singapore is generally the exception,” Emeritus Professor Carl Thayer, with the Australian Defence Force Academy in Canberra, told Spectrum.
In the case of Iran there are different factors at play in each country, he said
Thayer said Malaysia has begun to tilt more to the US in recent years. However, in Thailand, Universal Transportation Limited had proudly boasted its position as agent for IRISL with 14 vessels despite Thailand being designated a major non-Nato ally by the US.
Britain acted unilaterally, freezing all business ties with IRISL under its terrorism laws, meaning the shipping line has been denied access to British underwriters and the first class insurance providers in London.
This has forced the carrier to take up insurance from the relatively unknown Iranian provider Moallem. It remains unclear whether Moallem is re-insured by the Iranian state or whether it purchases re-insurance cover outside the usual European and US markets.
This means that financing for IRISL’s ships which existed prior to sanctions, although legal in principle, is now a much more risky proposition for the banks concerned, to say nothing of potential reputational damage to a bank from dealing with a sanctioned entity.
IRISL also stands accused of attempting to evade sanctions through a complex network of front companies to take advantage of loopholes in maritime law.
The companies amount to a paper shuffle, sharing the same address, employing the same staff and renting the same office space as the initial IRISL operations.
“The company started to use an array of deceptive practices to conceal its identity and skirt sanctions – including falsifying shipping documents, changing names and nominal ownership of vessels and even repainting ships,” Levey said.
In 2009 IRISL established Hafiz Darya Shipping Company (HDSL) focusing on containers and Sapid Shipping Lines which specialized as a bulk carrier. A third company Hanseatic Trade and Trust was established to manage four new IRISL vessels.
As a result, another 24 affiliated companies were blacklisted in January. Sixteen were traced to the same Hong Kong address and another four to the Isle of Man. IRISL owned vessels are often registered in a third country like Hong Kong, Germany or Malta.
The doubtful quality of insurance now held by IRISL and failure to meet scheduled repayments on loans began prompting creditors to demand repayment in full.
The three IRISL vessels – the Tuchai, Sabalan and Sahand – that were seized in Singaporean waters late last year were German registered and impounded after a High Court warrant was issued on behalf of French banks Credit Agricole and Societe Generale and The Export Import Bank of Korea.
The banks were seeking $US210 million in alleged loan defaults and damages.
Additional costs incurred by ship owners for an impounded ship can amount to about $US35,000 a day in docking and fuel charges. Further fines are imposed for delays and there are outstanding loans for the 80 new IRISL ships, according to Iranian press reports.
“IRISL”s other older ships are also thought to be at high risk of seizure having also been re-mortgaged in exchange for new ones,” one Western maritime source said. “It is impossible that the company can pay back all the loans ahead of time.”
As a result, IRISL is being forced to close some routes and the carrier’s days as a shipper of ballistic missile parts appear to be all but over — as is its future as a trusted name in trade – the latest casualty of sanctions on Iran.