Arab Press

بالشعب و للشعب
Thursday, Apr 25, 2024

If Russia wants to evade sanctions, it could learn from Iran's playbook

If Russia wants to evade sanctions, it could learn from Iran's playbook

As Russia faces unprecedented sanctions on virtually all sectors of its economy, it may have to turn to a trusted ally with more than four decades of experience with Western embargoes.

Until the Ukraine war, Iran was the most sanctioned country in the world, according to Castellum.Ai, which tracks sanctions. Russia now holds that record and the two countries are in what analysts call "a marriage of convenience" that is likely to grow stronger as the war in Ukraine escalates.

"Common interests in helping the other evade sanctions are important to these dynamics in Russia-Iran relations," said Giorgio Cafiero, CEO of Gulf State Analytics in Washington DC.

Amid tit-for-tat air blockades between Moscow and the West last month, Russian transport minister Vitaly Savelyev said his country is "studying the case of Iran" to help it deal with sanctions on maintenance and spare parts. Iran still operates some planes purchased before the 1979 Islamic Revolution that ruptured its ties with the West.

"This bilateral relationship will likely grow stronger as the war in Ukraine rages on, especially if the Vienna talks fail to revive the JCPOA," Cafiero added, referring to the 2015 deal that put verifiable limits on Iran's nuclear program designed to prevent the country from obtaining a nuclear weapon. He noted that Iran's isolation will further push Tehran to make itself useful to the Kremlin.

After decades of Western economic constraints, the Islamic Republic has become a master of evasion, using illicit markets and manipulating vessel-tracking to circumvent sanctions. Today, Russia is living a similar crisis as the West clamps down on Moscow in an effort to cripple its war effort.

Can Russia follow Iran's lead to circumvent Western sanctions? Some analysts say it already is.

The US, the G7 group of rich nations, and the European Union have imposed a series of unprecedented sanctions on Russia since its invasion of Ukraine on February 24.

The largest blow, however, would be to Russian energy, which by 2020 made up more than half of Russia's exports. The US and Britain have already banned Russian oil. Today, the EU -- which remains highly dependent on Russia's supply -- is considering a similar move, but is yet to reach consensus on the matter.

One way Russia can learn to survive potential sanctions on its oil is to shift vessels and rebrand its blend, a tactic that has been used by Iran.

Iran has in the past hidden millions of oil barrels off little-known ports in Asia to escape Western sanctions, Reuters reported in 2012. Barrel transfers in the dead of night from one vessel to another allowed Iran to masquerade under different flags, selling its oil to keen Asian buyers without catching the eye of Western monitors. Iran didn't respond to a request for comment, Reuters added.

"About 8% of the world's largest tankers are now engaged in the smuggling of sanctioned oil, largely comprising Iranian and Venezuelan product," said Cormac Mc Garry, security expert at Control Risks in London.

"Ghosting" is the most commonly used mechanism, Mc Garry told CNN, whereby ships turn off their automatic identification systems as they switch cargo from one vessel to another.

"The trick here is that the second tanker may look completely compliant [with sanctions], and the trader or consumer can be duped into thinking they have purchased an unsanctioned cargo," said Mc Garry.


Windward, an Israeli maritime intelligence company, said that over the past month it identified Russian crude trading under the radar, where there were ship-to-ship operations between oil tankers departing from Russian ports with other oil tankers. Tankers engaged in this activity arrived in North America, Asia, Russia and Europe, according to Windward.

"While the new restrictions are changing vessel behaviors ... it seems like some companies are maintaining business as usual, by concealing their actions and trying to keep regulatory bodies ... in the dark," wrote Windward in a blog post.

In Iran's case, remote Malaysian territories were used as "blending" or "re-branding" spots, where Iranian oil would be mixed with others and sold as a non-Iranian product to international buyers. "Malaysian blends" have been a known gateway to evading oil sanctions, with Asian buyers -- specifically Chinese -- making use of the rebranded mix to purchase sanctioned oil.

Russia is already taking a similar route, its oil now rebranded as "Latvian blend" -- a 49.99%-Russian mix that is blended with other oil and labelled Latvian. The crude has been bought by UK-based oil and gas company Shell, Bloomberg reported.

Dealing with sanctioned oil risks both reputational and financial damage, but demand for crude could still drive some buyers to the deep ends of black markets, analysts say.

"Commodities markets are already being squeezed due to supply concerns and so it is not clear that Russian supplies can be replaced," said Esfandyar Batmanghelidj, founder and CEO of the Bourse & Bazaar Foundation think tank in London.

Financially, Iran has built a shadowy network that uses front companies and circuitous transactions to launder money and dodge sanctions, analysts say, which some believe may be offered for Russian use.

Those companies are used to give the appearance that there is no Iran connection, said Richard Nephew, a scholar at Columbia's Center on Global Energy Policy in New York who previously serves as deputy sanctions chief at the State Department and director of Iranian Affairs at the US National Security Council.

Front companies are a tactic that Nephew believes Russia would be keen to learn from.

"I think that Iran would be prepared to help Russia with respect to some sanctions evasion tools," said Nephew, "but of course, this assumes that Iran itself has access that it can make readily available."

Sanction evasion is not an easy task, said Batmanghelidj. And while finding complicit partners delays economic collapse in the short-term, it still cuts the chances of long-term profit.

"The main lesson that Russian should draw from Iran's experience is that evading sanctions and resisting sanctions is hard," said Batmanghelidj. "At best, Russia can aim to demonstrate resilience to sanctions, but that just means staving a runaway economic collapse," he told CNN.

"This is why the real cost of sanctions is an opportunity cost of forgone growth."

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
China Criticizes US for Vetoing UN Ceasefire Resolution in Gaza
Saudi Arabia ranks first in UN index for e-government services in MENA
Israel Records 20% Drop In GDP, War In Gaza Is The Reason
Saudi Arabia's FDI Inflows Grow with New International Standards
Venture Capitals Power Up Across MENA Region
PM Modi Announces Opening Of New CBSE Office In Dubai
January Funding for MENA Startups Totals $86.5 Million
Saudi Arabia accelerates digital economy growth through Nvidia partnership
Israel unveils tunnels underneath Gaza City headquarters of UN agency for Palestinian refugees
Israel deploys new military AI in Gaza war
Egypt threatens to suspend key peace treaty if Israel pushes into Gaza border town, officials say
Saudi Arabia Warns Of A "Humanitarian Catastrophe" If Israel Moves On Rafah
US University To Shut Qatar Campus Due To "Heightened Mideast Instability"
Facebook and Instagram Ban Iran's Supreme Leader
Defense Technology Showcase Held in Riyadh
Saudi Arabia’s non-oil exports rise 2.5% to $6bn in November 2023: GASTAT
Rolls-Royce Executive Encourages Saudi Women to Tap into Their Inner 'Superhero' for Success in Defense Industry
Saudi Arabia launches National Academy of Vehicles and Cars
Saudi Tourism Minister Reveals Plan for 250,000 New Hotel Rooms by 2030
SAR to more than double eastern network passenger capacity with new trains deal
Saudi Arabia Enhances National Defense with New Partnerships
Saudi Aramco Maintains Arab Light Crude Pricing to Asia for March
NEOM Establishes New York Office to Support Investors
Saudi Wealth Fund Draws in Over $25 Billion Worth of Investments in Three Years, Al-Rumayyan Reveals
The Saudi Kingdom's Ultimatum to Israel: A Win-Win Peace with Saudi Arabia and the Arab World, or a Lose-Lose Continued Occupation and Endless Conflict
Biden condemns anti-Arab hate after WSJ opinion piece calls Dearborn ‘jihad capital’
Turkey Releases Seven Hostages Captured by Pro-Gaza Gunman
Arab Parliament Commends Women's Contributions to Societal Development
British and Hungarian Foreign Ministers visited Lebanese leaders to stress the importance of enacting UN Resolution 1701
Yemen's Houthis Say They Targeted British Merchant Vessel In Red Sea
Donald Trump Nominated for Nobel Peace Prize for 'Historic' Middle East Policy
US lawmakers approve F-16 jet sale to Turkey following NATO expansion support
Saudi Arabia Climbs 25 Places in World Bank's National Statistics Indicator
Tourism Growth in Saudi Arabia Fuels Advancements in the Hospitality Industry," Says Rotana Official
Houthi Rebels Request Departure of UN Staff from Yemen, Including US and UK Personnel, within a Month
Modi Inaugurates Hindu Temple on Site of Demolished Mosque in India
Over 25,000 Deaths in Gaza Amid Israeli Offensive
Escalating Clashes in Gaza as Israel Distributes Leaflets to Assist in Locating Hostages
Turkey's First Astronaut Set to Launch for International Space Station Today
Head of Palestinian Investment Fund Warns More People May Die of Hunger Than War in Gaza
Palestinian Envoy Criticizes UK for Alleged 'Double Standards' in Policies Toward Israel
Morocco to Lead UN Human Rights Council in 2024
Is artificial intelligence the solution to cyber security threats?
Egypt has been identified as the leading military force among Arab nations and ranks 15th globally
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Iranian Nobel Laureate Narges Mohammadi Receives Additional Prison Sentence
"Gazans Urge Israeli Forces to Target Hamas in Leaked Audio"
Biden States US and UK Airstrikes on Houthis Were a 'Defensive Action
Large Pro-Palestine Rally in London as Gaza Conflict Hits Day 100
South Africa Urges World Court to Halt Israeli Actions in Gaza
×