Tightening the Petrochemicals Net

Last month, the U.S. Department of the Treasury sanctioned Iran’s biggest petrochemical holding company, Persian Gulf Petrochemical, and reaffirmed its threat to “vigorously enforce” existing sanctions on Iranian petrochemicals exports – which provide the Iranian regime with $13 billion annually. Some U.S. allies haven’t gotten the message though because ships carrying products like ethane, methanol and urea continue docking around the world, most recently in Brazil.

Iran is exploiting the size and complexity of global sea-trade to sell its petrochemical products. Because ocean trade encompasses a wide spectrum of highly specialized, limited roles that could be interpreted as being excluded from U.S. sanctions, nobody is taking responsibility for stopping the sale of sanctioned cargo.

A single international maritime shipment may involve the services of multiple specialized actors, including cargo and steamer agents, sub-contractors, port-operators, refueling (bunkering) specialists, management firms, logistics companies and an assortment of other “maritime services” providers. Individually, their narrowly defined functions are unlikely to attract sanctions enforcement, which provides the freedom for these small operators to either deny or deflect culpability.

United Against Nuclear Iran (UANI) knows this to be true because maritime services companies have tried blame-shifting in their engagement with us. When UANI asked a Brazilian port agent about the reported unloading of urea at the Port of Imbituba in April, it replied, “Our job as Maritime Agency is to provide the clearances to berth the vessel not including what cargo it carries.” Another Brazilian agent similarly told UANI that its activities were limited to “port clearance” services. Similar responses have been received from Indian firms, too, that facilitated a shipment of methanol from Iran’s largest container port, Bandar Imam Khomeini, to the Port of Hazira. The Indian agent deflected blame in saying, “we are only [the] Steamer Agent appointed by the Chinese ship owner to attend their vessel during her stay at Ports in India.”

Further, “gray-zone” questions persist. Are companies allowed to provide any services at all to Iranian specially designated national (SDN) vessels, and if so, under what circumstances? What if the SDN vessel is not carrying a specifically sanctioned product? What is the U.S. position on bunkering of such vessels, and what is the policy on something as ostensibly innocuous as acquiring the documents to allow a ship – either an SDN vessel or a non-SDN vessel carrying petrochemicals – to enter a port area? The answers to these types of questions are either sufficiently ambiguous, undetermined – or entirely absent – which contributes to a climate of “plausible deniability.”

To be sure, U.S. authorities are successfully constraining the global purchasers who turn petrochemicals into fertilizers, plastics, paints, detergents and thousands of other household and industrial goods. But there are deficiencies in the Trump Administration’s policy that can and should be corrected to remain true to its policy of applying “maximum pressure” against the Iranian regime.

Iran Special Envoy Brian Hook and the Department of State should make it a priority to make the rules clear to the thousands of small fish around the world slipping through American nets and step up enforcement to drive home the point.

Tehran will of course keep trying to export petrochemicals, heavily discounted to offset the risk premium that buyers are taking on. Sanctions or no sanctions, Iran is betting big on expanding its petrochemicals industry, already its second biggest revenue source after crude exports, with billions of dollars of investment in pipelines and plants.

However, without the willing participation of small supplementary maritime services, Iranian ships could not gain access to international ports in the first place. Absent any of these small functions that nonetheless form crucial links in the chain of ocean commerce, an Iranian ship could not physically unload sanctioned products at all – and that fact would weigh heavily on Iranian petrochemicals exporters as they seek what should be an ever-narrowing window of exporting destinations.

About the Author
Daniel Roth is Director of Research at United Against Nuclear Iran (UANI) in New York. He leads UANI’s business intelligence and corporate engagement efforts.
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