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. An IEA report issued Friday said Iranian crude output was still relatively high, at 3.3 million barrels a day in April, down slightly from last year. But the agency said much of Iran’s unsold production is ending up in onshore and floating storage. Estimates of Iranian crude added to floating storage in March and April have ranged from 450,000 to 800,000 barrels a day, the IEA said. An additional 20 million to 25 million barrels have been added to onshore storage facilities in recent months. Big customers cut back While countries such as Turkey and South Africa appear to have ramped up imports from Iran ahead of the July 1 sanctions deadline, some of Iran’s biggest customers, including Japan and South Korea, have been gradually reducing Iranian crude imports. Europe has cut its imports from Iran to less than half its earlier level of 700,000 barrels a day. In addition, India has trimmed its oil purchases from Iran, which last year covered 10 percent of India’s oil consumption. During her visit there last week, Secretary of State Hillary Rodham Clinton pressed India to further reduce its oil imports from Iran. Members of the Organization of the Petroleum Exporting Countries are filling in the gap. Motivated in part by high world oil prices, OPEC crude supply in April rose 410,000 barrels a day, with Iraq, Nigeria and Libya providing about 85 percent of the increase, according to Friday’s report. Saudi Arabia’s crude oil production in April was unchanged at the relatively high level of 10 million barrels a day, but the IEA report said the kingdom has been offering price discounts for its Arab Light crude, which is widely sold to Asia. That could encourage countries such as China to shun Iranian oil. “They can’t move the stuff, and they’re really hurting,” said a senior State Department official with access to intelligence on Iran’s oil shipments. He spoke on the condition of anonymity because he was not authorized to speak publicly about the matter. Analysts warned, however, that Iran might have an easier time selling its oil during the third quarter of the year, when global oil consumption usually peaks. At this time of year, many refineries take advantage of relatively slow oil use to close for maintenance. The GPS tracking systems on Iran’s sea-going tankers are required under international law as a safeguard against accidents and spills, and ship captains are allowed to shut them down in only a handful of circumstances, such as when navigating waters known to be frequented by pirates. Vessels are easily tracked U.S. officials dismissed the Iranian tactic as ineffective, noting that Western spy satellites and other surveillance systems are easily able to track large ships on the open seas, even with the GPS turned off. The practice, begun in early April and noted at the time by a Reuters news agency report, has continued, reflecting a determined, if ultimately ineffective, effort to circumvent sanctions, the officials said. Some — and perhaps all — of the marooned oil will eventually be sold, U.S. officials acknowledge, as oil traders seek to make a quick profit on deeply discounted Iranian crude. But with global prices edging down in recent weeks, Iran may have to settle for far less than the world market price, the State Department official said. Iranian officials are expected to press for relief from sanctions at this month’s nuclear talks. The United States and its allies will insist on commitments from Iran to rein in its nuclear program and come clean about what Western governments say were past secret research efforts by Iranian scientists to design nuclear warheads. The Associated Press on Sunday published a computer-generated drawing of what it said was an Iranian explosives containment chamber of the type needed for nuclear-arms-related tests. The U.N. nuclear watchdog, the International Atomic Energy Agency, has long alleged that Iran used such a chamber to test detonators for potential use in a nuclear weapon. Iran has denied ever seeking to acquire atomic bombs. The wire service said the image was based on information supplied by an individual who had seen the chamber at Iran’s Parchin military site. The AP did not provide additional details, saying that doing so could endanger the informant’s life.
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