Kpler projects Iran’s oil revenues will reach zero by December
Around 20 Iranian and Iran-linked oil tankers are stranded 15 miles off Sri Lanka’s southwest coast with food, fuel and fresh water running low, after the U.S. Embassy in Colombo pressed Sri Lankan authorities to stop servicing the vessels, the Wall Street Journal reported Thursday. The tankers are part of a fleet of dozens of Iranian-linked vessels that have been drifting in Asian waters since July, when the U.S. reimposed its blockade of the Strait of Hormuz.
The Wall Street Journal described the stranded fleet as “the most visible consequence of the new pressure campaign by the U.S. to bring Iran to heel.” The paper called the broader effort “a hardball strategy aimed at forcing Iran into making concessions in the monthslong conflict,” and reported that the U.S., which “slapped Iran with many new sanctions this summer,” has in recent days warned Iran’s trading partners to “ditch the country.”
The U.S. Embassy in Sri Lanka’s capital told the government in August that it was tracking 19 Iranian tankers off the country’s western coast and urged officials to tell local port service providers to deny them support or risk U.S. secondary sanctions, according to Sri Lankan government documents seen by the Journal. Around the same time, many of the Iranian vessels pulled away from Sri Lanka’s territorial waters, drifting deeper into the Indian Ocean with their engines idled to conserve fuel, according to ship-tracking data and Sri Lankan maritime businesses.
In early September, two Iranian-flagged container vessels anchored in the port limits of Colombo. Sri Lanka’s port authority stated in a letter seen by the Journal that it was not “prudent to provide services to Iranian-flagged” vessels because of the risk of U.S. sanctions. The U.S. Embassy in Colombo then conducted a three-day training session in mid-September with more than 40 Sri Lankan officials, laying out the risk of U.S. penalties if shipping agents, fuel providers and other service companies “knowingly or unknowingly” support sanctioned vessels.
U.S. Ambassador to Sri Lanka Eric Meyer said in a September statement that “Sri Lanka sits at a strategic crossroads for global commerce, bringing both tremendous opportunity and the need for vigilance,” and that the U.S. was taking decisive action to stamp out sanctions evasion by “sharing U.S. expertise with our Sri Lankan partners.” The State Department said the U.S. will “continue to disrupt, expose, and dismantle” Iran’s illicit oil trade and called on the international community to hold Iran accountable. The State Department did not reply to a separate request for comment on the conditions facing the crews of the Iran-linked vessels.
Dubai-based shipping agents for the tankers have pleaded with businesses in Sri Lanka to send out fresh food and fuel, but representatives of Sri Lankan shipping companies said it has become difficult to secure approval from port authorities to provide any services for Iranian vessels. The owner of a Sri Lankan shipping repair company that dispatched a team to an Iranian ship just before the onset of the new restrictions found that provisions on the tanker were dwindling. Repair crews were told to bring their own food and warned they could not wash because the vessel needed to conserve fresh water, according to the company official.
Another Sri Lankan shipper said he has received desperate calls for food and provisions from agents of the tankers, but Sri Lankan authorities weren’t approving supply visits to Iranian ships. Thushara Rodrigo, a spokesman for Sri Lanka’s foreign ministry, acknowledged the risk that sanctioned ships might run out of food, fuel and water, and said that if ships require emergency provisions, private companies could be reluctant to supply the tankers and risk sanctions.
Before the U.S. blockade was reimposed, ships carrying Iranian oil would ferry the crude to international waters off Malaysia, where they transferred it to other tankers that would then transport it to Chinese refineries — an elaborate operation designed to evade U.S. sanctions on Iranian oil. The tankers would then sail back to Iran, pick up more oil and repeat the cycle. Some tankers are Iranian-flagged; others sail under other flags but have been sanctioned by the U.S. because of their involvement in the trade.
The blockade has now dealt this trade a blow. Iranian ships cannot return home. The recent U.S. sanctions blitz means that some Asian ports that once serviced them now refuse them out of fear of U.S. sanctions, leaving the tankers adrift at sea. The squeeze has also affected containerships bringing goods such as corn and industrial materials to Iran.
On a recent journey to international waters off the coast of Malaysia chartered by the U.S. advocacy group United Against Nuclear Iran, empty, rusting Iranian-linked ships floated high in the water. Many have been anchored there since July. “When they finish their jobs they park here,” said Charlie Brown, a researcher with UANI. “They don’t want to go back because of the blockade.”
One was the Elva, a sanctioned tanker that had loaded up with oil on Iran’s Kharg Island and crossed the Strait of Hormuz in June, according to financial data provider LSEG. It has been lingering off Malaysia since discharging the crude to another vessel in a ship-to-ship transfer in August. Sailors on the Elva appeared bored; one started dancing when he saw a passing boat, waving and shaking his hips.
Over the last two months, many of the tankers have left the area off Malaysia for the Indian Ocean and the coast of Sri Lanka, which is closer to Iran and has a history of providing fuel, fresh provisions and repair crews to Iranian ships. Other Iran-linked vessels have ventured to waters near India and China. Some of those that have remained in the familiar waters near Malaysia have moved north from an area known as the Eastern Outer Port Limits, where ship-to-ship transfers of Iranian oil have normally taken place; UANI analysts say this could be the result of stepped-up Malaysian enforcement activity. A Malaysian coast-guard official did not respond to a request for comment.
On a recent trip, a pair of small local sampan vessels pulled up to the Parnia, an Iranian cargo ship idling off the coast of southeastern Malaysia. The Parnia had been stranded there since July when it returned from China stacked with containers, according to ship-tracking data. The sailors onboard the sampans are known to go from ship to ship, selling basic supplies like cigarettes and beer.
Iranian ships were guarded when they were contacted by radio. In response to an inquiry about whether there was enough food onboard, one ship responded in terse Farsi: “Do not worry about our food.”
Oil analysts expect that the last of the Iranian oil still waiting to be transferred to buyers will run out in the coming weeks, with payments to Iran to conclude by year’s end. “All revenues drop to zero for Iran by December,” said Homayoun Falakshahi, head of Crude Oil Analysis at Kpler.
Advocates of a tougher policy against Iran say that targeting those who provision the ships could raise the cost — and risk — of owning and servicing vessels that carry Iranian oil and other goods, making it difficult to carry out Iran’s shadow oil trade. In August, the U.S. sanctioned a network of companies that provided fuel to Iranian ships. “A vessel that is sitting and not carrying oil is just a hole in the budget,” said Mark Wallace, UANI’s CEO, who has called for tougher U.S. sanctions against Malaysian groups that supply the ships.
The stranded tankers are the latest operational consequence of “Operation Economic Outcast,” the sanctions campaign Treasury Secretary Scott Bessent announced in August warning countries and companies doing business with Tehran they could face sweeping U.S. penalties, as MSI previously reported.