Malaysian maritime authorities too stretched, underfunded to stem trade in US-sanctioned Iran oil, observers say

The concerns come as a US delegation in Kuala Lumpur holds talks with officials over Tehran’s alleged underhanded selling of oil through service providers

‘Dark fleet’ of tankers believed to be operating under the guise of various brands, with secret oil transfers taking place off the Malaysian coast

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Offshore marine crew stand by on deck during cargo transfer from vessel to oil platform at sea, off Sabah. Malaysia’s maritime assets are notoriously poorly funded and unable to fully patrol waters, analysts say. Photo: Shutterstock

Published: 5:00pm, 9 May 2024Updated: 5:04pm, 9 May 2024

Malaysia’s underfunded maritime authorities may struggle to contain rampant transshipment of US-sanctioned Iranian oil off its coast, experts say, as a visiting US delegation revealed that Washington’s security forces had been monitoring ship-to-ship oil transfers in Malaysian waters.

Two representatives of the US Treasury Department are meeting the Malaysian government in Kuala Lumpur this week over concerns that Tehran’s capacity to sell its sanctioned oil is reliant on service providers based in Malaysia.

Speaking to members of Malaysian media, US Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson said the US had promulgated guidance to the Malaysian marine sector about the type of services that they are engaging in.

“These are ship-to-ship transfers, particularly at night, which we see from time to time. They are really designed to obfuscate the origin of the commodity, in this case, Iranian oil,” Nelson said.

A standby vessel nearby Velesto Naga 7 offshore jack-up drilling rig and oil production platform in Malaysian waters. The rebranding of Iranian oil as Malaysian puts Malaysia as the No 4 exporter of oil to China. Photo: Shutterstock

The trade sees Iranian oil transferred by a “dark fleet” of ageing tankers and falsely rebranded as “Malaysia Blend”, before being sold at steep discounts to small Chinese refineries. It is so large that on paper it would make Malaysia the world’s fourth-largest oil exporter to China, analysts say.