Increasingly hard-pressed to find buyers for its petroleum, Iran has been routinely switching off satellite tracking systems on its sea-bound oil tankers for more than a month, in what U.S. officials and industry analysts describe as a cat-and-mouse game with Western governments seeking to enforce sanctions on Iranian exports.
The unusual tactic was begun in early April and affects a quarter of Iran’s tanker fleet, according to the International Energy Agency (IEA), which has been monitoring the practice. The move, a violation of maritime law, is only modestly effective in cloaking 1,000-foot-long tankers as they ply the oceans in search of open ports and willing buyers. But it underscores Iran’s precarious position as it faces ever-tighter Western restrictions against its oil industry, which provides the bulk of export and government revenue.
Hobbled by sanctions against its banks and a growing international boycott of its petroleum, Iran is seeing its revenue sag while its oil sits in storage depots and floats in tankers with nowhere to go, U.S. security officials and diplomats say.
The country’s worsening prospects have encouraged Western governments as they prepare for nuclear talks with Iran, set to begin May 23. U.S. officials say the building economic pressure increases the chances for a breakthrough in which Iran would agree to abandon elements of its nuclear program.
“They are increasingly isolated — diplomatically, financially and economically,” David Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence, said Thursday. “I don’t think there is any question that the impact of this pressure played a role in Iran’s decision to come to the table.”
Cohen noted the cascading effects from Iran’s oil crisis spreading to other parts of the economy as consumer prices and unemployment rates soar.
“The value of their currency, the rial, has dropped like a rock,” Cohen told a gathering at the Center for Strategic and International Studies in Washington. “That has had a significant impact on Iran’s ability to pay for materials for the nuclear program, and, more broadly, it puts pressure on the leadership.”
Whether Iran is prepared to make significant concessions is unclear. But there is little doubt about the toll being exacted by sanctions.
“It has definitely hurt Iran,” said Amrita Sen, a London-based commodities analyst with Barclays Capital. “No doubt about that.”
One key impact of recent sanctions has been to choke off shippers’ access to maritime insurance, nearly all of which is underwritten in Europe, Sen said. That has made Iran ever more dependent on its own fleet of 39 tankers, including 25 super-tankers, according to IEA figures.
Those ships also face mounting obstacles. After coming under pressure from the United States, the ship classification society Lloyd’s Register said in late April that it would close its office in Iran and stop certifying the safety of Iran’s ships. The certification is needed by ships seeking entry at most of the world’s ports. Late last year, another leading classification society, Norway’s Det Norske Veritas, ended its relationship with Iran under U.S. pressure.
