Report

Black Navy

Black Navy

It’s hardly a secret that the Iranian regime views the current grinding war in Syria as more of a domestic than a foreign-policy concern. Its elite Islamic Revolutionary Guard Corps’ Quds Force has been training and financing a host of Shiite and Alawite sectarian militias in Syria to fight a war that Syrian President Bashar al-Assad’s conventional military and traditional paramilitary proxies have been unable to win on their own. Without the direct military intervention of Iranian-backed Hezbollah in Qusayr and Homs this year, those territories would still be under rebel control. Not for nothing has Mehdi Taeb, a confidant of Iranian Supreme Leader Ali Khamenei, famously described Syria as Iran’s "35th province," the loss of which would spell the fall of the Islamic Republic.

But now documentary evidence has come to light showing that Iran — which had previously been helping the regime in Damascus sell and ship its own sanctioned oil to international buyers — is shipping light crude into Syria under terms that practically amount to pro bono petroleum imports. Simply put, the Iranian regime is giving its natural resources away at a time when its own people are starving thanks to debilitating international sanctions on its nuclear program.

A packet of documents Foreign Policy obtained last week indicates that Iran has been "selling" shipments totaling around 4 million barrels of light crude oil over the last year to Syria at a 10 percent discount, at least since May of this year, when global oil prices were around $98 per barrel. The discounted cost borne by the Assad regime — about $88 per barrel, not including transport fees — appears to be paid out of a long-term $3.6 billion line of credit for energy imports that Tehran issued Damascus a few months ago to help it counteract the economic impacts of a devastating nearly three-year civil war. In reality, however, Assad may never be able to repay this loan — not that the Iranians likely even expect him to, given that they view his survival as inextricable from their own. This means that not only are the Iranians selling Assad oil at a bargain, but they’re floating him the money to buy it at that reduced rate.

David Butter, an expert on the Middle East’s energy sector at London-based think tank Chatham House, calculates that prior to the war, crude oil production in Syria was 385,000 barrels per day, of which around 150,000 barrels were exported and the rest processed through refineries for domestic consumption. But domestic production started to fall rapidly in 2012 when violence in the country escalated. "Now Syria is only producing 20,000 barrels per day and importing daily around 130,000 barrels of crude plus products from abroad," says Butter. By the regime’s own admission, Syria’s oil sector is now on the verge of collapse, with direct or indirect losses estimated at $2.9 billion as of October 2012. The country’s oil minister has reckoned that Damascus is spending $400 million per month on fuel imports.

A letter dated May 12, 2013, signed by S. Moradinasab, managing director of Sahand Naft Iran Ltd., a trading services company affiliated with Iran’s oil ministry, and addressed to Mohammad Alrobeh, the president of Sytrol, Syria’s state-owned oil firm (which has been sanctioned by the United States and the European Union), confirms the 10 percent discount as having been certified by the "latest resolution in the Special Economic Plan Committee." This blandly named committee, says David Patrikarakos, author of Nuclear Iran: The Birth of an Atomic State, is one of many set up by the Islamic Republic "for managing certain aspects of the economy and, in some cases, allocating funds to particular projects." Patrikarakos notes that this one is clearly linked to the crisis in Syria. Additionally, the packet of documents includes a contract, dated May 31, 2013, certifying the sale of over a million barrels of Iranian light crude to Syria, which was delivered to the port of Banias "during April 2013" via the Camellia, an oil tanker owned by a company with a registered address at offices belonging to the National Iranian Tanker Co. (NITC) in Tehran, the largest tanker company in the Middle East and a subsidiary of the National Iranian Oil Co. The contract stipulates that the purchase would either be transacted directly between the Central Bank of Iran and the Central Bank of Syria or "by the credit line which has been allocated by Iranian government to Syria."

This refers to an agreement that Syria and Iran signed this past July that extends a $3.6 billion long-term line of credit from Tehran to the Assad regime, allowing the latter to buy oil products. According to Reuters, the credit line was agreed to as part of a deal that "will allow Iran to acquire equity stakes in investments in Syria," meaning that Iran’s investment in Syrian state institutions likely goes beyond building militias and enhancing the regime’s flagging security apparatus. Tishreen, a pro-government Syrian daily, reported in May that Adib Mayaleh, the governor of the Central Bank of Syria, had acknowledged for the first time the extent of Iran’s concessionary loans to Syria was actually $7 billion. This money allows Damascus to pay for everything from energy to agricultural goods and textiles.

"I can’t see Assad repaying this loan anytime soon," Patrikarakos told me. "He may not even be around in another year or two to do so." But a freebie oil deal to the Syrian regime may have dire populist consequences back in Iran. There’s growing perception among the Iranian people that its clerical government is squandering crucial funds on foreign adventurism rather than on domestic exigencies.

Parvaneh Vahidmanesh, an Iranian human rights activist based in Washington, thinks the mullahs’ behavior is disgraceful. In an email to me, she wrote: "The Iranian government has money to support the Assad regime, to provide it with almost free oil, but it has no money to support its own population at a time when people in the capital city can’t afford to buy meat and when schools in poor districts are burning down because of cheap, faulty heating systems. Why is the money of Iranian children being used for guns and bombs in Syria?" Patrikarakos believes such opinions are widespread in Iran. "The Iranians are suffering badly from sanctions and they’re wasting money — money they don’t have — giving it to Hezbollah and Assad," he says. "Floating Syria’s energy sector is politically stupid, too, because the greater threat to the mullahs is their own population more than the fall of Assad."

Furthermore, Iran isn’t only running its chief natural resource gratis to Assad. It’s also spending extra money on sophisticated methods of dodging international sanctions enforcers — such as registering foreign shell companies and adopting "flags of convenience" for its oil tankers. Most vessels listed in the documents packet as responsible for transporting the millions of barrels of light crude to Syria have previously been reported on as case studies in Iran’s maritime craftiness in skirting a far-reaching oil embargo. For instance, the Baikal, owned by NITC and sailing under Tanzanian registration, was quarantined off the Greek island of Syros a year ago because of suspicions that its cargo and transport violated EU sanctions. Yet in the documents obtained by Foreign Policy, it is shown as having transported 1,100,635 barrels of Iranian light crude to the Syrian port of Banias in December 2012. A quick search on Equasis, a ship-tracking service, also reveals that the Volga, which shipped almost 850,000 barrels to Assad in February of this year, had its name changed to the Ramtin in June of this year. It now sails under the Iranian flag and is owned by Tabuk Maritime Inc., the address of which is registered to a management company in Dubai.

But perhaps the most interesting tanker is the Tour 2, transporter of 978,321 barrels of light crude to Banias in January. Originally named simply the Tour, this ship is notorious for opportunistically swapping flags and owners to move oil around the world — both from Iran and from other rogue states. It was originally registered to ISIM Tour Ltd., a Maltese company owned by ISI Maritime. Along with nine other Maltese companies, ISI Maritime got caught in the U.S. Treasury Department’s net in 2011 for being a front associated with Islamic Republic of Iran Shipping Lines (IRISL), the entire fleet of which was sanctioned by the United States in 2008 and then by the United Nations and the EU in 2010. (The ISI Maritime disclosure evidently had little impact at the time in Malta, an EU country subject to European sanctions law.) But the story didn’t end there: ISIM Tour’s parent company was Irano Hind Shipping Co. (a joint venture between the Shipping Corporation of India and IRISL), which was itself sanctioned by the United Nations in 2010. India dissolved that partnership in 2012 after the U.N. Panel of Experts on Iran, a body appointed by the U.N. Security Council to monitor sanctions enforcement, recommended that member states freeze the company’s assets.

According to the Financial Times, the Tour 2 switched flags and owners in the space of 24 hours in March 2012 after sailing from one Syrian port to another to extract Assad’s crude for export to a legally restricted marketplace (prior to EU sanctions, Syria had sold 95 percent of its modest oil exports to the European Union). On March 24, 2012, a day after the Tour 2 docked at the Syria port of Tartus, and following concerns raised about the ship’s true owners, Transport Malta, the company that manages Malta’s maritime registry, issued a statement saying that it had decided to suspend the vessel’s registration certificate and remove it entirely from the Maltese shipping register. But after the Tour 2 traveled from Tartus to Banias, it simply exchanged its Maltese mast for a Bolivian one, bid goodbye to ISIM Tour as owner, and said hello to Auris Marine Co., an entity registered in the Marshall Islands, which isn’t subject to EU jurisdiction. However, Auris Marine was annulled hours after this transaction occurred, the Financial Times also reported. Then Forbes discovered in January of this year that the Tour 2’s new owner had become a different Auris Marine Co., this one registered in Belize and already under suspicion for owning another Iranian tanker found to be trafficking oil to Syria. And as the Wall Street Journal previously determined, in a story about yet another Iranian oil tanker, this Belize-based Auris Marine "is ultimately controlled by an IRISL subsidiary." Its current registered address is Irano Hind’s offices in Tehran.

Much of the problem in charting the provenances and sinuous histories of Iranian ships owes to the kind of clever maneuvering outlined above. A workshop report published in January by the International Institute for Strategic Studies (IISS), a multinational think tank that partners with the U.N. Panel of Experts on Iran, found that "[t]o date, more than 100 changes in names in vessels related to Iranian shipping have been noted," all of them creating a nightmare for sanctions enforcement efforts. In one case, Iran even set up a company in an unnamed Pacific Island state for just 20 days for the purpose of conducting a single shipping operation.

Still, despite all the work Iran puts into its game of maritime subterfuge, it’s not impossible to further bottleneck its petroleum trade or at least make the cost of transporting crude, especially to Assad’s criminal regime, more prohibitively expensive. You can change an oil tanker’s name or flag, but you can’t change its IMO number — that is, the unique identifier issued to every vessel by the International Maritime Organization. This means that the slippery vessels mentioned above are actually quite easy to keep an eye on.

One Iran-sanctions expert I consulted, who would only talk on background, indicated that monitors do keep an eye on most of the Islamic Republic’s ships, but may not kick up a fuss because of certain geopolitical sensitivities (ongoing P5+1 nuclear talks, a Syrian peace initiative, etc.) or an awareness that a zero-tolerance enforcement regime isn’t viewed favorably by all comers. For instance, in September, the Luxembourg-based General Court — Europe’s second-highest court — canceled sanctions against IRISL after it found that the European Union had offered insufficient evidence tying the shipping company to Iran’s nuclear program. (The European Union is fighting that ruling and taking preliminary steps to reimpose sanctions on IRISL.)

But while plenty of countries are both willing and legally entitled to conduct energy deals with the Islamic Republic, most insurance companies, port authorities, sea captains, and other necessaries of the global shipping industry still prefer to do business with legitimate partners, not pariah states. Many non-EU countries are also susceptible to Western pressure to cut the mullahs off completely. Tanzania, for instance, is on record as saying that it will deflag any Iranian ships it may have sold its colors to; Belize claims to have undertaken efforts to get Iranian-owned vessels taken off its national register. As for the Marshall Islands, erstwhile host of the first Auris Marine Co., it is cited by IISS as among the flag states that "take their responsibilities seriously," referring to proper "know-your-customer" vetting procedures. It also helps that the Marshall Islands’ corporate and shipping registries are located in Fairfax County, Virginia, which makes the CIA headquarters a convenient neighbor.

Much of the oil going from Iran to Syria is no doubt designated to keep Assad’s brutal war machine functioning, and with discounts and loans it’s effectively free, meaning that the true expense is being borne by the beggared Iranian people. As for Syria, the worst humanitarian catastrophe of the 21st century — which previously featured the use of chemical weapons and now includes a state-perpetrated terror-famine in Damascus and a nationwide polio epidemic — shows no sign of dissipating. Indeed, since Assad’s unleashing of sarin gas on Aug. 21, his confidence has only grown. Yet the West, which is reluctant to arm Syrian rebels and is dead set against intervening directly in the civil war, still expects a brokered solution with a regime that has no incentive to broker one and is now sustaining itself on free oil. Perhaps before walking into the Geneva 2 peace protocol in November, the so-called Friends of Syria could get creative and at least try to obstruct Iran’s energy largesse to a mass-murdering dictator.

Sahandnaftiran Letter

Camellia Contract 1

Camellia Contract 2

Total Operational Costs of Mt Baikal

Total Operational Cost of Mt. Tour2

Total Operational Cost of Mt Volga