Malaysia says Iranian oil transfers near its waters exploit a maritime loophole

KUALA LUMPUR: Malaysia 's maritime agency says Iranian-linked tankers are exploiting "jurisdictional gaps" to conduct ship-to-ship transfers of sanctioned oil near its waters, rejecting allegations that authorities ignored a long-running trade allowing Iran to evade US sanctions.

US based advocacy group United Against Nuclear Iran (UANI) and shipping industry observers say waters near Malaysia's southern Johor state have become a key hub for ship-to-ship transfers involving Iran's "shadow fleet", aging tankers that often operate with disabled tracking systems, false identities and opaque ownership structures to conceal the origins of crude bound largely for China.

The area, known as the Eastern Outer Port Limits, or EOPL, in the South China Sea is about 70 kilometers (45 miles) off Johor. It lies along one of the world's busiest maritime trade routes and is about halfway between Iran and China, which buys about 90% of Iranian oil.

U.S. officials have previously said Iranian oil exports rely heavily on service providers and ship-to-ship transfers operating near Malaysian waters.

UANI says there have been 42 ship-to-ship transfers of Iranian oil conducted in the EOPL area since Feb. 28, when the US and Israel attacked Iran, starting a war in the Middle East. UANI used satellite imagery to observe the operations.

"Because of Malaysia's inaction, it is facilitating this business model by Iran and China and dark fleet actors," senior UANI adviser Charlie Brown said, warning Malaysia is becoming "a facilitator rather than merely a transit point" for illicit activity.

Malaysian Maritime Enforcement Agency Director-General Mohamad Rosli Abdullah said the transfers are often done outside the country's territorial waters and in remote areas beyond radar coverage, especially in locations near maritime boundaries or international shipping routes.

"The selection of such locations is intended to exploit jurisdictional gaps and limit direct enforcement action by local authorities," he told The Associated Press.

The UANI allegations "do not align with the actual situation on the ground and do not reflect the operational realities of maritime enforcement conducted by the MMEA," he said, adding that the lack of real-time intelligence-sharing among domestic and international agencies also hampers effective action.

Iranian oil flows despite a US blockade

Clandestine high-seas transfers from Iranian-linked tankers have persisted for years, allowing Tehran to sell its crude while offering buyers plausible deniability about the oil's source.

While not illegal, Malaysia discourages unsanctioned transfers outside designated areas, where such operations can be supervised, as they greatly increase the likelihood of a spill, involve aging vessels and are carried out far from ports where mistakes could be more easily contained.

Despite a US blockade of Iranian ports that started in mid-April, UANI said it has tracked Iranian-linked tankers still operating, though it is not clear how many are now getting through.

Neither the Iranian Embassy in Kuala Lumpur nor the Iranian mission to the UN answered requests for comment. The US State Department declined to comment.

As of Tuesday, two dozen Iranian-linked tankers tracked by UANI were anchored or loitering near the EOPL area used for transfers off Johor, though it was not clear how many had sailed before the blockade began.

"It's business as usual," UANI's Brown told the AP.

UANI maintains that Malaysia could enforce environmental regulations for advance notification of ship-to-ship transfers, prevent Malaysian companies from providing support to ships involved and require all ships to carry adequate insurance against accidents and oil spills, among other things.

The MMEA director general said enforcement is conducted strictly under Malaysian law and relevant international conventions, and authorities have "never compromised nor provided any special treatment or privileges to any country."

Indonesia reviews border oil transfers

Though the area where the oil transfers are taking place is widely regarded as part of Malaysia's broader economic zone, it borders the Riau Archipelago, which is Indonesian territory.

Indonesia's Foreign Ministry said authorities were reviewing the situation to determine the legality of the activity. "Indonesia does not permit its territory or maritime zones to be used for unlawful activities," said Foreign Ministry spokesperson Yvonne Mewengkang.

Indonesia upholds legitimate navigational rights under international law governing the seas including the right of innocent passage, transit passage and the right of passage through Indonesian maritime zones," she added.

The MMEA director general noted that Malaysia earlier this year seized two vessels, one stateless and the other flagged to Cameroon, involved in the transfer of 2 million barrels of crude oil in Malaysian territorial waters.

The vessels were later released on bond for conducting unauthorized oil transfers. UANI's Brown said one of the vessels was spotted earlier this month conducting a ship-to-ship transfer of suspected Iranian oil in the waters off Johor.

Malaysian authorities "will continue to strengthen monitoring and enhance strategic cooperation with relevant agencies to ensure that the nation's maritime domain's safety and sovereignty are consistently safeguarded," the MMEA director general said.