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Iran–Sea Transport : The embargo delusion

Yesterday in Istanbul, at the CICA summit, the Russian Prime Minister Vladimir Poutine stated that an agreement was “almost made” regarding a project of a resolution that would sanction Iran because of its nuclear program. This resolution will moreover be subjected to the vote today. Last May, one again Russians announced that the draft of the resolution mentioned a reinforcement of inspections of Iranian cargos. Then it would be possible to go through Iranian vessels not only in the ports but as well on international waters. Such step is not unnecessary because Tehran has found some ways to get round the current embargo.

Embargo :
1. A government order prohibiting the movement of merchant ships into or out of its ports.
2. A prohibition by a government on certain or all trade with a foreign nation.

If you dare to visit some ports in Europe, you will be surprised to notice there is a substantial number of a container coming from Iran. As far as the US embargo on Iran is still under way, it would be nonsense to not wonder why those Iranian containers are piling up in most of the European ports. As a matter of fact, this is the obvious proof some trade exists between Europe and Iran and that sea exchange is not embargoed at all.

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The containers in question belong to the IRISL Group, the Islamic Republic of Iran Shipping Lines, which is a public company belonging to the Iranian State. Let’s specify that this company is fully operational due to the fact Iran ranks among the top 20 of the 140 member states of the IMO, the International Maritime Organization. This explains most probably the enthusiasm its Secretary-General shown on his latest visit in Iran in September 2009 : he underlined the strategic geographical position of Iran, the vitality of its sea international exchanges and of course its positive involvement as an IMO member. His speech made no mention of an embargo. Of course, why would he mention an embargo that is screwed so easily ?

Thus the IRISL is proud to list on its website its several shipping lines [1] that connect Iran to almost the entire world. We find of course the closest neighbouring countries : Emirates, Pakistan, Saudi Arabia, Syria and Egypt. We notice as well the biggest world energy gluttons, i.e. China and India, with many shipping lines connecting various ports in South and East Asia. And of course, we can point out that Iran is very well connected to Europe : Netherlands, Germany, United Kingdom, France, Malta, Italy, Spain … At last, South America, Africa and Australia are not at lost because they dispose of their specific bulk cargo lines. There are only few parts of the world which seem to not be connected to Iran : North America and Russia. However, as there is a solution to every problem, it is possible to change the flag and the painting of the boat while it’s on the way. This is confidential and illegal practice but some vessel captains don’t hesitate to apply it according to the information that was collected in some Ministries of Transport. Thus some boats, we don’t know how many exactly, dispose of two identities, two registration numbers… and of course two flags !

Consequently Iran’s international trade links are so busy that the IRISL is seeking for increasing its fleet. The number of vessels was up to 138 in 2008 and it reached a number of 154 in 2009. We can assess the fleet will increase again in 2010 if we consider the numerous and discreet visits of Iranian officials to countries where you can find many ship-owners, such as Greece and Cyprus. Why those specific countries ? Ship-owners are well-known for their flexibility and their lack of transparency, qualities that are much appreciated when you wish to circumvent an embargo.

Of course, when such deals are closed, we may wonder how important sums are transferred to and from Iran. Actually this is very simple. While some banks refuse to accept letters of credit rose from and to Iran, we are pleased to inform you that most Iranian banks maintain close relations with European and Asian banks. Thus, if your Iranian partner’s bank is one of those listed hereafter, you will find no difficulty to open letter of credit or to be transferred money from Iran. The banks are : Export Development Bank of Iran, Bank Tejarat, Bank Mellat, Bank Sarmaye, Bank Sanat o Madan, Bank Refah. Except from American companies, it appears very easy for any company in the world to come through the US embargo on Iran. However, if an American company is willing to close some deal with another company based in embargoed Iran, we are delighted to tell you that some Iranian screen companies operate in United Arab Emirates, Singapore and Malaysia, countries which have no problem to maintain trade relations with the United States. Business is business and Iran is not the isolated country we think. As most of the goods (90%) are shipped by vessel, this explains why Iran’s sea transport maintains a satisfactory activity and why its trade fleet needs to be increased.

As a matter of fact, the demand is consequent. However it doesn’t concern Iran only but its neighbouring countries as well. So to revert to the busy shipping lines, as it was well underlined by the IMO Secretary-General, the geographical position of Iran is very central, at the crossroads of Europe, Middle-East and Central Asia. This is the reason why Iranian ports and specially Bandar-Abbas are specific points for trans-shipment of transit cargo to and from CIS countries and to a lesser extent Afghanistan. In other words, containers go through an intermediary destination, which is an Iranian port in this specific case, and goods are transhipped to another mean of transport (boat, truck, train). Later those goods are conveyed to another destination. If we consider Iran’s geographic location, such proceedings offer a solution to open to the outside world land-locked regions such as Central Asian ones. Some shipping companies such as Maroos, an Iranian company, or Wilhemsen, a Norwegian company that operates in Iran, are well aware of such fact and their service list specifies such transhipment can be carried out in Iran. Thus this shows that transhipment from and to Central Asia can be made efficiently in Iranian ports and of course if such service is provided by almost every shipping company operating in Iranian port, it’s because there is a consequent demand to fulfil. Iran represents the most obvious doorway of Central Asia.

Despite the crisis that started in September 2008 and affected international trade flows as well as sea transport, Iranian ports manage to maintain their activity. Indeed it’s interesting to note that the Port of Bandar Abbas had to reinforce lately its infrastructures as it is specified by the Italian Engineering company Trevi and moreover the PMO, the Port & Maritime Organization of Iran, made several tender announcements so to better the equipment of some Iranian ports and even ensure their extension.

Theoretically, the US embargo on Iran should prevent any possible trade partner from doing business with Iran. In practice, almost nobody cares about it. Not only it is possible to import from and export to Iran but it’s also an easy task especially for the companies that are not US-based. It is so convenient that European ports don’t even hide the Iranian containers that pile up on their quays. If we consider the sole international trade, this embargo is hot air. A delusion.

So what should we expect exactly ?

| Mots Clefs | Enjeux : Sanctions (du Conseil de Sécurité) |
| Mots Clefs | Enjeux : Sanctions (du Conseil de Sécurité) |

| Mots Clefs | Instituions : Politique Economique des mollahs |

[1IRISL shipping lines