Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: On an early Friday morning in October, Bloomberg, Serene Cheng,
Speaker 2: and a team of colleagues set out on a small
Speaker 2: supply ship from Singapore. They were headed into the waters
Speaker 2: of the South China Sea.
Speaker 1: We sailed off from Singapore around five in the morning.
Speaker 1: We were very fortunate the seas were very calm that day.
Speaker 1: En route de one of my colleagues events bottled like dolphins.
Speaker 2: But Serene wasn't there for a sightseeing cruise. Her team
Speaker 2: was looking for tankers carrying Iranian oil that was sanctioned
Speaker 2: by the US, and after seven hours on the water,
Speaker 2: they saw something that caught their eye. Through the haze,
Speaker 2: they found what they were looking for. Dozens of huge ships,
Speaker 2: some more than three football fields long, looming in the distance.
Speaker 1: We were quite taken aback by the skill and just
Speaker 1: a number of tankers that were sitting and loitering around
Speaker 1: the area.
Speaker 2: As Serene's team was sailing through this cluster of ships,
Speaker 2: they spotted two oil tankers side by side. They identified
Speaker 2: one tanker as the wind Wind, a Panama flagged vessel,
Speaker 2: and the other ship sitting low in the water and
Speaker 2: laden with crude oil was a Cameron flagged vessel, the Titans.
Speaker 2: The Titan is known to have transported Iranian oil and
Speaker 2: it's infamous within shipping circles. It is no known insure,
Speaker 2: no known beneficiary owner, and the only contact details for
Speaker 2: its registered owner are a post office box in the Seychelles.
Speaker 1: We saw these two vessels Titan and they were doing
Speaker 1: a ship to ship transfer right before our eyes. Look
Speaker 1: you can see the hose. Can you see the hose connecting,
Speaker 1: So that's the hose that's transferring the oil.
Speaker 2: Unbelievable.
Speaker 1: I think we realized that, oh, this is the this
Speaker 1: is checkpot, this is the one that has been handling
Speaker 1: Iranian coude and it was connected to a vessel that
Speaker 1: is often going to with China.
Speaker 2: What Serene and her team witnessed was likely one of
Speaker 2: many oil transfers that happen every day in the South
Speaker 2: China Sea transfers that happen away from prying eyes and
Speaker 2: skirt US sanctions. The US has essentially declared Iran's oil
Speaker 2: sector off limits, and it can restrict or cut off
Speaker 2: access to its financial system for any company or person
Speaker 2: found trading with Iran. But Iran needs the oil revenue,
Speaker 2: and it appears to be using a network of intermediaries
Speaker 2: and vessels owned by shell companies to get it oil
Speaker 2: to willing buyers like China, and that's creating a multi
Speaker 2: billion dollar shadow industry that's flourishing today.
Speaker 1: When we look at ship tracking data and we look
Speaker 1: at satellite images, it is very clear that this supply
Speaker 1: chain is happening, and it's moving a lot of oil
Speaker 1: and there's a lot of money to be made in
Speaker 1: terms of its dollar value. Just for this year alone,
Speaker 1: for the first nine months of twenty twenty four, we
Speaker 1: are looking at more than twenty billion dollars and that
Speaker 1: is already a very conservative estimate.
Speaker 2: Welcome to The Big Take Asia from Bloueberg News. I'm wanh.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today on the show,
Speaker 2: how our vast network of aging ships are covertly transferring
Speaker 2: millions of barrels of Iranian oil and skirting US sanctions.
Speaker 2: What are the risks for neighboring countries if a shady
Speaker 2: transfer goes wrong? And what is the US doing to
Speaker 2: keep sanctioned oil out of reach. Back in twenty eighteen,
Speaker 2: the US reimposed sanctions on Iran's major oil exporters, banks,
Speaker 2: and shipping companies. That meant Iran had a hard time
Speaker 2: finding willing customers to buy its oil. Serene Chung, Bloomberg's
Speaker 2: team leader for oil trading in Asia, says the sanctions
Speaker 2: cut off crucial revenue for Iran and hit its economy hard.
Speaker 1: Iran really relies on this oil revenue. Billions of dollars
Speaker 1: goes back to Tehran from the sale of this oil.
Speaker 1: There is a real need for the Iranians to think
Speaker 1: of different ways to bring the oil to the customers.
Speaker 2: One workaround Iran's using to get its oil out on
Speaker 2: the market involves what's known as a dark fleet.
Speaker 1: Duck fleet tends to be very old tankers, don't have
Speaker 1: proper insurance coverage, tends to sail under what we know
Speaker 1: as flecks of convenience, and tend to support sanctioned and
Speaker 1: restricted regimes and flows of oil from the likes of Iran,
Speaker 1: Venezuela and Russia.
Speaker 2: And one thing these tankers tend to do a lot
Speaker 2: is to turn off their transponders, which sends signals of
Speaker 2: the ship's location and other basic information for navigational safety,
Speaker 2: and with them off, the ships can essentially disappear off
Speaker 2: the map.
Speaker 1: They can go dark for a long period of time,
Speaker 1: maybe days or even weeks. Nobody would actually know what
Speaker 1: it's doing doing that period of time.
Speaker 2: Recently, Serene and the Bloomberg team noticed a pickup in
Speaker 2: the number of these shadow tankers off the east coast
Speaker 2: of Malaysia.
Speaker 1: When we looked at ship tracking data, we can see
Speaker 1: that it's very very clear where the plaster is. It's
Speaker 1: almost like a parking lot right. It is known to
Speaker 1: be the biggest cluster of dakty tenkas in the world.
Speaker 1: It can contain around any time between seventy to one
Speaker 1: hundred vessels, many of them supertankers, the biggest in the world.
Speaker 2: The ships are clustered off the east of jahor the
Speaker 2: southernmost state of Malaysia.
Speaker 1: So this particular area, it's in what we know as
Speaker 1: the Malaysian z which is the exclusive economic zone. It
Speaker 1: is outside of Malaysia's territorial waters. Because it is a
Speaker 1: very large area, that's not that much scrutiny.
Speaker 2: This lack of oversight and its location in the middle
Speaker 2: of a shipping corridor between China and Iran make this
Speaker 2: a perfect place for dark fleet vessels to move sanctioned oil.
Speaker 2: So Serena and her team focused on this cluster of tankers.
Speaker 2: They gathered nearly five years of satellite images from the
Speaker 2: hot spot and train the computer to recognize one unique
Speaker 2: pattern two ships side by side for hours at a time.
Speaker 2: In the shipping industry, it's called a ship to ship transfer,
Speaker 2: which could be an indication that oil is being moved
Speaker 2: from one vessel to another.
Speaker 1: When a cargo gets transferred via ship to ship, it
Speaker 1: tends to be relabeled as another type of oil. When
Speaker 1: Iranian oil gets transferred out at sea of Malaysia, that
Speaker 1: is a good opportunity for this relabeling of sensitive cruds
Speaker 1: into Malaysian crude. But of course, what we can only
Speaker 1: say is that adjacent side by side ships in this
Speaker 1: manner suggests that a ship to ship transfer is happening.
Speaker 2: Or you know, they could just be stopping in the
Speaker 2: open sea to say hi.
Speaker 1: Right, A right, you want to keep warm or something, right.
Speaker 1: But I want to be clear that not all the
Speaker 1: time these would be dark business, but oftentimes because of
Speaker 1: what we know of what's happening in this area, it
Speaker 1: tends to be.
Speaker 2: So to nail it further down, Serene and the Bloomberg
Speaker 2: team layered the satellite image with ship tracking data to
Speaker 2: check whether these tankers are where they say they are,
Speaker 2: and on top of that, another set of data was
Speaker 2: revealing on paper, the official data from Chinese customs just
Speaker 2: didn't add up.
Speaker 1: If you look at Chinese official imports from Iran that
Speaker 1: has been down to zero since the middle of twenty
Speaker 1: twenty two, and when we checked with the Chinese customs,
Speaker 1: there's not single barrel of Iranian oil that has been
Speaker 1: imported by China since middle of twenty twenty two. And
Speaker 1: China has in fact imported a lot of Malaysian oil,
Speaker 1: way more Malaysian oil than Malaysia can even ever produce.
Speaker 2: And all of this research led the team to the
Speaker 2: discovery of those two ships in mid transfer.
Speaker 1: Yeah, yeah, the SSEs STS. So it was really exciting
Speaker 1: for us because I think in that moment we realize
Speaker 1: that with these two tankers, we could potentially join the
Speaker 1: Dots and tell our story about how the Dark Fleet
Speaker 1: has been helping oil move from restricted regimes such as
Speaker 1: the one in Iran to willing customers in China.
Speaker 2: For Iran, the South China Sea gambit is a means
Speaker 2: of survival. The country needs the revenue and there aren't
Speaker 2: many buyers willing to skirt the sanctions. But China doesn't
Speaker 2: recognize the US curbs on Iran, and these shadow operations
Speaker 2: offer a way for the country's refineries to access cheap oil.
Speaker 2: But what are the risks and what needs to be
Speaker 2: done to curb the shadow exchange before the worst happens.
Speaker 2: That's after the break. Every year, billions of dollars of
Speaker 2: oil is estimated to move from Iran to China with
Speaker 2: the help of a vast shadowy fleet and bluebirg Serene
Speaker 2: Cheng says this growing cluster of dark tankers poses multiple risks.
Speaker 1: The first risk we would be looking at is environmental.
Speaker 1: This is a lot of oil that is being transferred
Speaker 1: from one vessel to the other, and it's happening quite
Speaker 1: frequently in these waters. Should there be any fire, explosion,
Speaker 1: oil spill, or any sinking of ships, this would be
Speaker 1: a real tragedy and catastrophe to the coastal states in
Speaker 1: what is otherwise a pretty pristine area that's of Malaysia,
Speaker 1: Singapore and Indonesia.
Speaker 2: And in recent years there have been incidents that showed
Speaker 2: just how dangerous the risks can be. An explosion last
Speaker 2: year aboard the Pablo, a dark vessel which had been
Speaker 2: observed in Iranian waters, killed three crew members, and in
Speaker 2: July this year, a collision between an oil products tanker
Speaker 2: and a dark fleet crew tanker result in fires on
Speaker 2: both ships. The dark fleet trade is also a growing
Speaker 2: source of tension between Washington and regional powers like Malaysia.
Speaker 2: The US has called on Malaysia to do more to
Speaker 2: tackle the problem, but with little success, and earlier this year,
Speaker 2: at a Bloomberg Economic Forum, Malaysian Prime Minister and more
Speaker 2: Ibrahim denied that any transshipment of Iranian oil took place,
Speaker 2: not one should of evidence they induced, and he added
Speaker 2: that Malaysia isn't able to monitor what's happening out at sea.
Speaker 2: There was ship to ship, thus shipment in the international walks,
Speaker 2: and we do not have the capacity to observe a
Speaker 2: monitor there. Meanwhile, China didn't comment specifically on the oil transfers,
Speaker 2: but it said its trade with Iran is reasonable and
Speaker 2: legal and should be respected and protected. Iran's Foreign and
Speaker 2: oil ministries, the US Treasure Department, and Malaysia's Foreign Affairs ministry,
Speaker 2: as well as a Prime Minister's office, didn't respond to
Speaker 2: requests for comment as for the transfer between those two tankers,
Speaker 2: the wind Win and Titan that Bloomberg Reporters observed, a
Speaker 2: letter requesting comment to the po box of Titan's owner
Speaker 2: was returned with the address not found, and for win Win,
Speaker 2: a representative in London for its registered owner declined to
Speaker 2: comment on their clients or to provide contact details. And
Speaker 2: Serene says, exactly what can be done about the dark
Speaker 2: fleet and who's willing to take responsibility for it is
Speaker 2: a complicated question.
Speaker 1: The US would like Southeast Asia to properly enforce its
Speaker 1: sanctions against countries like Iran, but on the other hand,
Speaker 1: countries like Malaysia are on very friendly terms and have
Speaker 1: long term ties with Iran as well as with China,
Speaker 1: where a lot of this Iranian oil is going to.
Speaker 1: You can imagine that there are different priorities and as
Speaker 1: capabilities when it comes to sanctioned enforcement in this area
Speaker 1: and stream.
Speaker 2: How do you see this trend of sanctioned oil moving
Speaker 2: around Asia playing out? Especially with the new US president
Speaker 2: coming into the White House.
Speaker 1: I think everyone is looking out to see what a
Speaker 1: Trump administration will do in terms of its foreign policy
Speaker 1: and in terms of how harsh it is when it
Speaker 1: comes to sanctioned enforcement. But what I would say is
Speaker 1: that this trade, involving dark fleet and involving the movement
Speaker 1: of sanctioned and restricted oil, it is a very resilient trade.
Speaker 1: They will not go away because at the end of
Speaker 1: the day, there is a lot of money to be
Speaker 1: made by these dark fleet tanker operators who are helping
Speaker 1: the sanction that restricted regimes. They are making way more
Speaker 1: than they would on a legitimate fleet, and of course
Speaker 1: the likes of regimes such as those in Iran, Venezuela
Speaker 1: and Russia. They really are motivated to get the oil
Speaker 1: to the customers. There is a very eager buy of
Speaker 1: oil in China, and there are middlemen and tanko operatas
Speaker 1: willing to help this trade, so it will not go away.
Speaker 2: This is the big take Asia from Bloomberg News. I'm wanha.
Speaker 2: This episode was produced by Young Young, Naomi Um and
Speaker 2: Jessica Beck. It was mixed by Alex Suguiera in fact
Speaker 2: checked by Naomi and Adrianna Tapia. It was edited by
Speaker 2: Aaron Edwards, Caitlin Kenney, Clara for Raira Marquez, and Emily Cadman.
Speaker 2: There was additional reporting by Clara Wilund, Soon, Krishna Kara,
Speaker 2: and Yasufumi Saito. We'd like to give special thanks to
Speaker 2: Bloomberg's Originals team. Naomi Shaven is our senior producer, Elizabeth
Speaker 2: Ponzo is our senior editor, Nicole Beemster Bower is our
Speaker 2: executive producer, and Sage Bowman is Bloomberg's head of podcasts.
Speaker 2: Please follow and review The Big Take Asia wherever you
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