SINGAPORE -- Iran's efforts to sustain its oil exports to Asia in the face of tightened U.S. sanctions appear to be getting some assistance from Malaysia, according to analysis of data on ship movements.
"Iranian oil typically arrives in the Straits of Malacca and is handed over using ship-to-ship oil transfer to Chinese very large crude carriers," Samir Madani, co-founder of TankerTrackers.com, a company in Sweden which monitors the shipping and storage of oil via analysis of ship transmission data, commercial satellite imagery and other information, told the Nikkei Asian Review.
Under the U.S. sanctions revived last November to pressure Iran into negotiations over its foreign policy and missile programs, any company involved with sales of Iranian oil can be fined and cut off from the U.S. financial system. Until May 2, the U.S. granted waivers for China, India, South Korea, Japan and others to continue buying Iranian oil with the expectation they would phase down their purchases.
But according to Madani's observations, transfers of Iranian oil to Chinese tankers are taking place near Malaysian waters with help from Malaysian tugboats. Throughout their time near Malaysia, Madani said, the Iranian ships keep their transponders -- devices that transit identifying information for safety purposes -- turned off.
Vandana Hari, founder and chief executive of Singapore-based oil markets research company Vanda Insights, called the evidence of Iranian oil transfers through Malaysia "circumstantial... but pretty compelling."
She said shipping data she received showed that crude oil shipments to China from Malaysia surged 86% in May from a month earlier.
"This cannot be explained as higher flows of Malaysian crude to China [because] Malaysian oil output is stagnant," she said.
Yan Chong Yaw, director of Asia oil research at data company Refinitiv, said that while there is a well-established ship-to-ship oil transfer area off the Malaysian port of Kuala Sungai Linggi in the Straits of Malacca, he doubted Iranian cargoes would be handed off within the country's territorial waters given the risk of U.S. penalties.
Government agencies and maritime transport companies in Malaysia declined to comment on the reported transfer activity.
Iranian oil exports have plunged since the U.S. restored sanctions on the sector, falling from 2.7 million barrels per day last November to only around 300,000 bpd in June, according to Reuters.
Much of the continued flow appears to be coming to Asia, but it is unclear how much is going through Malaysia. Refinitiv's Yaw said he is now tracking three tankers that appear to be heading directly to China with Iranian crude. Lately, though, he has noticed ship-to-ship transfers of Iranian oil occurring in waters between Sri Lanka and the Maldives.
Malaysian Prime Minister Mahathir Mohamad has kept up a long and deep relationship with Iran while also making a point of prodding the U.S. In his previous stint as prime minister, Mahathir extended early recognition to the Islamic regime established after Iran's 1979 revolution.
"His relationship with Iran, which goes back nearly 40 years, is sort of born out of his view that the West has no place in Asia or the Middle East," said Simon Littlewood, president of Singapore-based management consultancy AGC Global. "Mahathir will relish upsetting the U.S. by acting as a conduit for Iranian oil exports."
Additional reporting by Nikkei staff writer P. Prem Kumar in Kuala Lumpur and Nikkei Asian Review deputy editor Zach Coleman in Tokyo.