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Iranian Oil Is Stuck Off Coast of Texas, but U.S. Firms Won’t Touch It – WSJ

  • Companies that manage unloading tankers say they are too worried about Iranian reprisal to handle the captured oil on the Suez Rajan-
A satellite photo from last year shows two vessels, including the green Suez Rajan, in the South China Sea.(Planet Labs/AP)  
A satellite photo from last year shows two vessels, including the green Suez Rajan, in the South China Sea.(Planet Labs/AP)  

Ian Talley, WSJ

EnergiesNet.com 07 19 2022

U.S. federal prosecutors can’t auction off 800,000 barrels of seized Iranian oil sitting in a Greek tanker off the coast of Texas because U.S. companies are reluctant to unload it, according to people familiar with the matter. 

Prosecutors commandeered the Suez Rajan tanker carrying the oil earlier this year after charging its Greek owner with sanctions evasion, and directing the ship into the muddy-green waters 65 miles off Galveston’s coast. The U.S. Coast Guard cleared the tanker for unloading, but the companies that manage those transfers—known as lightering—say they are too worried about Iranian reprisal to handle the captured oil.

“Companies with any exposure whatsoever in the Persian Gulf are literally afraid to do it,” said a Houston-based energy executive involved in the matter, citing worries “that the Iranians would take retribution against them.”

The executive said that several of the companies contacted about unloading the oil declined.

Another executive at a shipping company involved in lightering in the Gulf of Mexico also flagged concerns over retaliation. “I don’t know if anybody’s going to touch it,” the executive said. 

The impasse over the seized oil illustrates the difficulties the U.S. government faces when it comes to enforcing sanctions against Iran, which has ramped up attacks against Western shipping interests. Tehran uses those tactics to deter the West from interdicting Iranian exports, according to analysts and former U.S. officials. 

The Iranian navy seized a Marshall Islands-flagged oil tanker in April, seen in an image taken from a video. (Iranian Navy/AP)
The Iranian navy seized a Marshall Islands-flagged oil tanker in April, seen in an image taken from a video. (Iranian Navy/AP)

The question of how to deal with the Iranian oil comes amid quiet efforts by top U.S. diplomats to restart negotiations with Tehran over a nuclear accord that former President Donald Trump had pulled out of in 2018. President Biden took office pledging to revive the international pact that imposed limits on Iran’s nuclear programs, but those efforts had stalled last year.

“That vessel’s emblematic of a much bigger drama that’s playing out about how we deal with Iranian threats,” said a former U.S. official. 

Tehran’s military forces have hijacked several Western tankers traveling through the shipping channel off the nation’s southern shores in recent months in what analysts say is retaliation for Western oil seizures. The Defense Department said earlier this month that Iran’s navy attempted to hijack two more tankers but were turned away by the Navy ships protecting international waters in the Strait of Hormuz. 

U.S. officials said Monday that the Pentagon is deploying F-35 jet fighters and a Navy destroyer to the Middle East as part of an effort to deter Iran from attempting to seize oil tankers and to respond to Russian aggression in the region.

Iran analysts say that the Iranian navy’s seizure in late April of the Marshall Islands-flagged Advantage Sweet was likely in retaliation for the U.S. commandeering of the Suez Rajan.

“We categorically reject the U.S.’s baseless allegations of hijacking foreign oil tankers by Iran,” a representative for Iran’s mission to the United Nations told The Wall Street Journal. “Iran insists on the security and stability of the Persian Gulf and Strait of Hormuz. However, if oil tankers violate harmless passage, pollute the environment, or smuggle Iranian fuel, Iran does not hesitate to address those irregularities and infringements based on its laws as well as relevant international obligations.”

Iranian state media, quoting the government in Tehran, claimed that the Advantage Sweet was seized because it had hit a fishing craft. The owners of the Advantage Sweet didn’t respond to a request for comment.

Watch: Iran Attempts Seizure of Two Oil Tankers, U.S. Navy Says
Iran attempted to seize two oil tankers near the Strait of Hormuz, the U.S. Navy said on Wednesday. Video appears to show shots being fired at one of the oil tankers. Photo: U.S. Department of Defense

People familiar with the case say the Suez Rajan came under U.S. government scrutiny only after a nonprofit organization that has advocated for comprehensive sanctions against Tehran—the New York based United Against Nuclear Iran, or UANI—accused the ship of carrying the sanctioned oil, citing satellite photos and ship-tracking data. Lawyers representing 9/11 victims and their families, whom U.S. courts have given the right to claim compensation from Iran’s government, also filed suit against one of the ship’s former owners.

That allegation, along with a subsequent civil suit, prompted federal authorities to take on the case, those people said. 

The Greek company that manages the vessel on behalf of its owner didn’t respond to a request for comment, but has previously said it was investigating the matter.

Prosecutors are expected to use the proceeds from a planned sale of the seized Iranian oil to fund the U.S. Victims of State Sponsored Terrorism Fund, which provides compensation to victims of terrorist attacks, as authorities have done in the past. 

“The U.S. cannot enforce oil smuggling sanctions if the shipping and related industry businesses live in fear of Iranian retaliation,” said Mark Wallace, UANI’S chief executive. “Without real American deterrence, Iran can act with impunity to defeat even the best crafted sanctions laws.”

The government probe led to an indictment, which remains sealed, against the Greek owner. Although prosecutors can’t officially seize the oil until it is unloaded, the owner directed the tanker to the Texas refinery hub under the terms of a plea agreement, according to the people familiar with the matter.

The Justice Department declined to confirm the sealed indictment against the Greek shipowner or explain the lengthy delays in unloading the tanker. The State Department declined to comment on the Suez Rajan, but said the administration is enforcing sanctions. 

Federal prosecutors and senior security officials have in the past announced such seizures, using them as an opportunity to censure Iran for funding terror groups with its oil sales and as a warning to others helping Iran evade sanctions.

“It’s quite unusual for this to be going on as long as it’s been going on,” one former U.S. official familiar with the matter said. “And then for the vessel to be sitting off the coast of Texas for however many weeks it’s been, that’s a mystery too.”

Laurence Norman in Brussels contributed to this article.

Write to Ian Talley at Ian.Talley@wsj.com

Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the July 19, 2023, print edition as ‘Iranian Oil Is Stuck Off the Texas Coast’.

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