tehranbureau An independent source of news on Iran and the Iranian diaspora

Tehran's Merchant Fleet Sails Close to Wind


19 Mar 2011 17:43Comments
iran_cargo_ship.jpgStaff at state shipping agency admit to changing ships' names, owners, and even paintwork to evade sanctions.

[ dispatch ] The tall building occupied by Iran's shipping agency looks a lot different from other government offices in Tehran. Instead of ideological symbols, the dominant theme here is nautical -- anchors, lanterns, and sails. The staff, too, look different. There are more smart suits, ironed collars, and well-shaven faces around.

The general air of tidiness reflects the seriousness with which Islamic Republic of Iran Shipping Lines, IRISL, goes about its business. With a commercial fleet of 169 ships carrying nearly a third of Iranian exports and imports, the firm is the dominant player in Iran by a long stretch, although there are a number of private shipping companies as well.

Staff at IRISL see themselves as waging a full-scale, if hidden, international war to circumvent international sanctions and keep the freight moving.

In 2008, the U.S. Treasury Department placed IRISL on its sanctions list on the grounds that its vessels were carrying military freight. Then it was barred from taking out insurance and loans in London, and finally, last year, the United Nations Security Council approved a new set of sanctions which included the right to inspect, confiscate and, where necessary, destroy the freight.

The U.N. resolution provoked a strong reaction from Tehran, where parliament instructed the government to mete out equal treatment to ships belonging to states that inspect Iranian vessels, and to provide naval protection to commercial shipping where necessary.

Its most recent financial statement, for the Iranian year ending March 2010, indicates that its 35 customers include Iran's Defense Industry Organization.

Even so, IRISL always insists that it complies with all laws and regulations. At the same time, it says it cannot be responsible for the content of freight, and must trust statements made by owners and by port officials. But officials there, speaking on condition of anonymity, acknowledge that the company uses whatever loopholes it can to get round restrictions on what it can carry.

A recently-retired ship's captain says IRISL's long experience and intimate knowledge of the laws of the sea means it is well equipped to get round obstacles.

"Most of the experts working for this organization were educated in Europe, they know the international rules very well and can identify loopholes that were not foreseen when embargo laws were passed," he said.

A mid-ranking IRISL official said, "Many of the employees are no fans of Iranian government ideology or policies, but regardless of their political views, they care about the national interest and also about safeguarding their jobs, so they're ready to take on challenges in unpredictable situations."

The official admitted that the company used a range of tactics such as changing a vessel's registered name or owner, setting up shell companies, sailing under flags of convenience, counterfeiting shipping documents, and sometimes even repainting a ship.

"Everyone knows we use these hide-and-seek tactics, but the point is whether they can catch us out," he added.

Since the United States blacklisted IRISL and all its vessels in September 2008, 73 of the 123 ships listed at the time have changed hands -- on paper, at least. Some are now registered with companies based in locations from Hong Kong to the Isle of Man.

An international law expert with IRISL explains that these places are chosen because "they don't have rules and regulations that will disrupt our operations." If steps are taken to blacklist vessels under new management, he said, "it's a very time-consuming process, so we'll have time to change the place where ships are registered."

The head of a private shipping company in Iran said that because sanctions were primarily political, they were not communicated to the international shipping industry effectively, so that some European transport firms were still unclear what their obligations were.

One measure that has hit IRISL is the refusal of Lloyds in London to extend marine insurance to its vessels. When insurers in other European states refused to provide cover, Iran obtained it in Bermuda. But this arrangement ended in 2010, so the government in Tehran invested $1 billion in a domestic consortium called Moallem Insurance, whose cover and credit was accepted by some trading partners in Germany, Japan, Britain, China, and Cyprus.

But this is only a partial solution. IRISL still faces the danger that banks in Europe will confiscate vessels in lieu of payment on loans, on the grounds that they do not recognize Moallem Insurance. The risks are real -- Tehran has had to pay cash to reclaim three ships in Singapore and one in Hong Kong, seized by French and German banks, respectively, and is in negotiations to secure the release of another vessel in Malta.

"European banks are in poor economic shape and are tempted to do the same, recouping loans by confiscating ships. If that happens, we will definitely have problems with making cash repayments to release the vessels," the IRISL official interviewed for this report said.

IRISL's chief executive Mohammad Hossein Dajmar told the last shareholder meeting that 41 vessels still on order were subject to similar loans. This means they too are at risk of being seized.

Despite such pressures, and the general sluggishness of the international freight transport market, Dajmar remains bullish.

He says the volume of cargo shifted from March to November last year was 25 percent higher than in the preceding 12 months, and the company's gross revenues were 40 percent higher by the same comparison. However, he noted that net profits were down on past years.

An economist in Iran, who did not to be identified, said he believed the company would not be showing a profit unless its accounts included government assistance designed to cushion the blow of sanctions.

Staff at IRISL are well aware that any tightening up of the regulations to which their vessels are subjected would be damaging. According to the company official, if vessels start being checked systematically, the risk factor and thus cost of shipping under an Iranian flag will rise considerably, even if inspectors do not uncover illegal consignments.

That will alarm shareholders in IRISL, which was formerly state-owned but is evolving so that some 90 percent of its stock is now in private hands.

Mehrafarin Bahrami is the pseudonym of a business journalist based in Tehran.

Copyright © 2011 Mianeh

SHAREtwitterfacebookSTUMBLEUPONbalatarin reddit digg del.icio.us
blog comments powered by Disqus

In order to foster a civil and literate discussion that respects all participants, FRONTLINE has the following guidelines for commentary. By submitting comments here, you are consenting to these rules:

Readers' comments that include profanity, obscenity, personal attacks, harassment, or are defamatory, sexist, racist, violate a third party's right to privacy, or are otherwise inappropriate, will be removed. Entries that are unsigned or are "signed" by someone other than the actual author will be removed. We reserve the right to not post comments that are more than 400 words. We will take steps to block users who repeatedly violate our commenting rules, terms of use, or privacy policies. You are fully responsible for your comments.