Sanctions-busters prefer privacy
DUBAI – ON A RADAR map, the northern mouth of the Suez canal resembles a Bermuda Triangle-sur-Mer: ships have a habit of disappearing. So it was with the Emerald, an oil tanker which went through the canal on February 1st and vanished. Two days later it reappeared off the coast of Syria. What happened in the interim is now the focus of an international investigation.
Israel believes the Emerald was the source of an oil spill that has washed more than 1,000 tonnes of tar onto its Mediterranean beaches (and those of neighbouring Lebanon). The case so far is largely circumstantial. The tanker, which was carrying Iranian oil to Syria, was in the right place to have caused the spill, but it will take time to gather forensic evidence.
Yet on March 3rd Gila Gamliel, Israel’s environment minister, not only blamed the Emerald for the spill but accused Iran of causing it in a deliberate act of “environmental terrorism”. It was a dubious claim. Iran has a history of sabotaging oil tankers, not spilling oil from them. Ms Gamliel offered no evidence. Benny Gantz, the defence minister and hardly an apologist for the ayatollahs, said Israel has none.
Without proof, there is no reason to suspect the Emerald was anything but an ordinary Panama-flagged tanker, owned by an obscure holding company, running dark to ferry oil between two countries under economic sanctions—and there is nothing unusual about that.
Oil commands attention like no other commodity, for good reason. Pork bellies do not power the world; national fortunes do not rise and fall on orange-juice futures. A surge in the price of Brent crude, the international benchmark, has shaken the markets. If the politics of the business can be wild, though, the mechanics of it should be a routine matter of contracts and logistics.
In the Middle East they are often not. The Emerald is one of dozens of tankers put to unusual use since 2018, when America imposed sanctions on Iran’s oil exports. As onshore storage filled with unsold oil, some of Iran’s tankers were pressed into service as floating storage units. The waters off its main oil port turned into a maritime parking lot.
Other tankers load cargo in Iran and transfer it to smaller vessels at sea to obscure its origins. These ship-to-ship transfers can lead to spills. The vessels involved often lack insurance and turn off their transponders to conceal their activities. They also hide behind a thicket of bureaucracy that spans the globe: tankers seized in Indonesian waters in January for transporting Iranian crude have links to firms in China, Singapore and the Marshall Islands. Of the world’s roughly 2,700 large oil tankers, more than 6% are now being used by Iran for storage or sanctions-busting, estimates Lloyd’s List, a shipping journal.
For other states the problem is not distribution but payment. Lebanon defaulted last year and is running out of hard currency. In February it struck a desperate deal with Iraq, which is the world’s sixth-largest oil producer. It has a glut of heavy-fuel oil, a leftover after refining more valuable products. Heavy oil makes up half the output of Iraq’s ageing refineries.
It is the wrong grade of fuel for Lebanon’s power plants. But the government nonetheless agreed to buy 500,000 tonnes of the stuff. Burning it will produce electricity, but also lots of pollution, owing to its high sulphur content (around 4%). It also risks damaging power-plant turbines.
If this seems a bad deal for Lebanon, it is not much better for Iraq, which will be paid through an escrow account at Lebanon’s central bank. The money cannot be withdrawn or transferred abroad, only spent on goods and services inside Lebanon, an import-dependent country where a currency crisis has halved imports and crippled manufacturing. In other words, it is a barter arrangement with a country that has little to barter.
By The Economist
