May 2025 Iran Tanker Tracker

Shadow Fleet, Shifting Risks: How Sanctions and Maritime Evasion Threaten Global Oil Spill Liability Regimes

Recent developments from Washington, London, and Panama signal a tightening of global scrutiny, but also highlight new links between sanctions enforcement and environmental protection.

Cracking Down: OFAC continues sanctions actions

Following the April publication of the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) updated guidance targeting the maritime oil trade tied to Iranian sanctions evasion, and in continued strong support of the White House National Security Presidential Memorandum (NSPM-2), the US Maximum Pressure Campaign continued with brisk pace in May.

OFAC took several more actions this month against people and companies from Iran, China, India, UAE and Singapore, as well as vessels flagged by Panama, Sao Tome & Principe, San Marino.

Red Flags for Compensation: IOPC Funds’ Growing Concerns

The London-based International Oil Pollution Compensation (IOPC) Funds addressed this issue head-on in their April 2025 session. With member states expressing concern over the increasing use of opaque, uninsured vessels for sanctioned oil trades, the Funds debated how such vessels could erode the core international regime for oil spill liability and compensation.

Without P&I (Protection & Indemnity) insurance or adherence to the CLC (Civil Liability Convention), polluting tankers operating in this shadow ecosystem could leave coastal states—especially in Southeast Asia—without recourse in the event of a major incident.

Many delegations expressed, “deep concern over the risks and financial exposure of ‘dark fleet’ vessels, especially due to the lack of insurance and the potentially dangerous conducting of STS operations.”

These STS operations of Iranian Oil bound for buyers in China, occur mainly in Southeast Asian Waters near Singapore, Indonesia and Malaysia, and the coastal states should increase their monitoring, information-sharing and enforcement activities.  This action was called for by the 33rd session of the International Maritime Organization (IMO) Assembly, which convened in December 2023, and adopted Resolution A.1192(33), calling upon flag, port and coastal States to take measures against ‘dark fleet’ or ‘shadow fleet’ operations.

A Proactive Step: Panama Targets Shadow STS Transfers

In an encouraging development, the Panama Maritime Authority (PMA)—custodian of the world’s largest flag registry—has moved to tighten controls over its own fleet. In May 2025, it announced that all Panama-flagged vessels conducting STS operations must provide 48-hour advance notice.

Although the MARPOL convention already requires a 48-hour notification to the Coastal State, this additional flag-state requirement seeks to prevent Panama’s flag from being exploited by rogue operators conducting clandestine oil transfers—often in high-traffic Southeast Asian waters like the Malacca and Singapore Straits.

Panama's action could serve as a model for other open registries. It also reinforces the growing realization among flag states that enforcement of sanctions and marine safety must go hand-in-hand.

However, the it remains a fact that the majority of OFAC sanctioned vessels are Panama-flagged, as well as the majority of UANI’s identified Ghost Armada tankers are likewise under the flag of Panama.  So it is obvious that further deliberate action is required to de-list these illicit ships.

Until this increased flag state enforcement occurs, the oil still flows, as displayed in the Iranian export statistics for May 2025:

*figures to be updated over the following weeks.

Sanctions and Environmental Risk: A Converging Crisis

What unites these developments is the recognition that sanctions enforcement, while vital to upholding international law, can inadvertently fuel the rise of unregulated, high-risk shipping activity. The more the legitimate maritime industry distances itself from sanctioned trade, the more illicit actors fill the void—with older ships, forged documents, and zero insurance.

This is not a hypothetical concern. Dark fleet vessels have already been linked to oil spills, near-collisions, and port call deceptions. When accidents occur, victims may find no liable party, no insurer, and no compensation.

Conclusion: Closing the Gap

To close this gap, coordinated international action is required. Flag states, coastal states, port states, maritime insurers, port authorities, maritime law enforcement agencies and even environmental regulators must work in unison—not in silos. Efforts like OFAC’s updated guidance, the IOPC Funds’ scrutiny, and Panama’s registry reforms are promising steps. But more action must follow.

As this enforcement architecture evolves, so too must our mechanisms for protecting the oceans from preventable harm. In the battle against illegal oil trades, it’s not just revenue and reputation at stake—it’s the global maritime system itself.