The mounting tension in the Red Sea has caused a spike in the cost of crude oil, with prices surging more than 3 percent in response to America's reaction to the recent Houthi attack. Complicating matters, Iran has been selling more oil than ever before, despite facing sanctions from the US administration. There are concerns that this revenue could be used to finance groups like the Houthis in Yemen, as Iran has significant influence in the region.
The situation in the waters surrounding the Arabian Sea and the Red Sea has become increasingly chaotic and lawless. Iranian proxies, such as the Houthis and Hezbollah, are reportedly receiving ample funding through various means. One of these methods involves the smuggling of oil through what experts have labeled as the Dark Fleet or Ghost Armada.
On Thursday, Iran's Navy seized an oil tanker in the Gulf of Oman as a retaliatory measure for the US seizing the same vessel months ago. The ship was found to be carrying smuggled Iranian oil, which is under sanction. Such provocative actions not only escalate tensions but also pose a threat to the global economy. The incident highlights the ongoing issue of illicit oil trading and smuggling.
Experts estimate that anywhere from 300 to 560 tankers, mostly old vessels, make up this Dark Fleet. Their ownership is difficult to determine as these ships often turn off their transponders and conceal their activities on the open sea. They seek registration in countries with lax regulations that grant them the ability to fly their flag. This allows them to operate and trade internationally outside the jurisdiction of Western nations, primarily shipping sanctioned oil.
Iran's official oil exports were limited to around 400,000 to 600,000 barrels per day in 2019. However, the Ghost Armada has significantly increased this number to an estimated 2.4 million barrels per day, largely sold to China. The revenue generated from these transactions has undoubtedly provided Iran with a much-needed influx of funds.
In response to the rise of illicit oil trading, a group of 15 Congressmen wrote a letter urging the US State Department to exert pressure on Panama, as many of the ships in the Ghost Armada fly the Panamanian flag. They believe that Panama should be urged to de-flag these vessels involved in smuggling operations.
The State Department acknowledges that Iran goes to great lengths to evade sanctions, but argues that the country only manages to receive a fraction of its oil revenue due to these efforts. Nonetheless, the persistent smuggling activities of the Ghost Armada continue to undermine international efforts to impose sanctions on Iran and maintain stability in the region.
