WASHINGTON has entered “phase two” of its Iran sanctions enforcement programme that involves targeting marine insurers and shipowners, using them to police Iranian shipping and oil exports, a seminar heard.

Insurance companies, including P&I clubs, flag states and other marine service providers are under increased pressure from the US government to comply with unilateral sanctions, London-based maritime lawyer Daniel Martin told the event in London.

So-called “phase one” enforcement largely targeted banks, but scrutiny has extended to other shipping sectors, he told the International Maritime Industries Forum.

“Now regulators are looking to commercial organisations to be the police force,” he said.

Unilateral US bans on Iranian shipping, oil and petrochemical exports in place throughout 2019 have placed global shipping at the forefront of geopolitical unrest as companies and owners grapple with the trading and commercial implications. The use of punitive secondary sanctions also gives the US extra-territorial reach, extending beyond US companies and citizens.

The sanctions were widely criticised for their disruption, high cost and inconsistent and unfair application by the panel speaking at the forum. This included the International Chamber of Shipping, Citi Group, The Standard Club and International Registries.

The ICS met with a US State Department in early November, said Simon Bennett, the group’s deputy secretary-general, and one of the panellists.

“They were incredibly assertive,” according to Mr Bennett. “It was made very clear that they have a willingness to use every tool at their disposal to enforce their policy.”

The meeting was led by US State Department official, David Peyman, a deputy assistant secretary who lead sanctions policy and implementation, Mr Bennett later told Lloyd’s List.

“These restrictions on trade are being used as a weapon to promote diplomatic foreign policy objectives. These may be objectives which we might not necessarily agree with… but they leave us with legal options that we can’t do anything other than comply,” he said. “The US is wanting to put pressure on third parties to act as policemen which we really think is the job of government and US trading partners.”

The ICS meeting with the state department asked for clarity but it suited the US government to “provide as little clarity as possible”, Mr Bennett added.  “Ultimately, everything in shipping involves being subject to the law and the jurisdiction of the US whether it's reinsurance or payments in US dollars.”

The Standard Club’s Ewa Szteinduchert, said insurers and the maritime industry is general was “a little bit behind” when it came to enforcement and compliance.

“Banking was always one of the areas the authorities were always targeting,” she said.

The world’s top-three liner companies have collectively employed more than 150 people to stay on top of sanctions compliance, Citi Group head of shipping Shreyas Chipalkatty told the forum.

“The cost of compliance is enormous,” he said, adding that sanctions were used as “political theatre”, citing the recent moves against China’s Cosco, the world’s largest shipowner.

The Office of Foreign Assets and Control sanctioned two Cosco subsidiaries in September for breaching Iranian sanctions, throwing tanker markets into chaos amid uncertainty regarding which ships were affected.

“India, for example, buys Iranian oil in large quantities and pays rupees which the Iranians use to buy Indian industrial goods, and this is absolutely fine with the State Department,” said Mr Chipalkatty.

“So, I think it’s more about making sending messages, it’s about political theatre rather than actually achieving something on the ground.”

Iranian oil exports have plunged since the US reimposed sanctions at the end of 2018 and withdrew from a nuclear pact with Iran.

Exports in October were at 190,000 barrels per day in October, barely a tenth of pre-sanctions levels. As sanctions have tightened, Iran has increasingly relied on subterfuge to ship vessels. Strategies have included switching off vessel transponders which signal their location and using ship-to-ship transfers to disguise cargo origin and destination.

A subterfuge fleet of ships has quietly been purchased to establish a shipping logistics chain for Iran-China flows, with STS commonplace off Fujairah, Malaysia and Singapore, amid vessel name, flag and ownership changes. This has compounded efforts by charterers, operators and marine service providers to stay compliant.