November 30, 2018 | Policy Brief

U.S. Treasury Ramps Up Effort to Disrupt Syria-Iran Oil Trade

November 30, 2018 | Policy Brief

U.S. Treasury Ramps Up Effort to Disrupt Syria-Iran Oil Trade

The Department of the Treasury moved on two fronts last week to disrupt Iran’s illicit and mounting exports of crude oil to Syria, which provide a multi-billion dollar lifeline to the Bashar al-Assad regime. First, Treasury imposed sanctions on a multinational network responsible for shipping “millions of barrels of oil to the Syrian government” and transferring hundreds of millions of U.S. dollars to Hamas and Hezbollah terrorists. Second, Treasury issued a global advisory on the risk of sanctions for illicit oil shipments, which included the names and hull numbers for 35 ships that delivered oil to Syria between 2016 and 2018.

The illicit oil procurement network is comprised of actors in Iran, Russia, and Syria. Treasury’s designation of two senior officials at the Central Bank of Iran (CBI) underscores the extent to which the Iranian regime actively conspired to evade sanctions. According to Treasury, CBI funneled payments through an Iranian pharmaceutical firm to an Iranian bank in Russia, where Syrian businessman Mohammad Amer Alchwiki withdrew them. Alchwiki and his firm, Global Vision Group, worked with a subsidiary of the Russian Ministry of Energy (MoE) to transport the oil to Syria. The role of MoE strongly suggests high-level cooperation from the Russian government.

According to Treasury, Alchwiki’s access to CBI funding also enabled him to serve as “a critical conduit for the transfer of hundreds of millions of USD banknotes to Iranian proxies in the Levant,” including Hamas, Hezbollah and the Islamic Revolutionary Guard Corps (IRGC)-Quds Force. To reinforce its conclusions, Treasury produced a handwritten receipt for $63 million that Alchwiki and a Hezbollah financier provided to senior CBI officials.

In addition to exposing the Alchwiki network, Treasury’s Office of Foreign Assets Control’s (OFAC) issued an advisory on sanctions risk for those involved in any aspect of the illicit oil shipments. “Those who facilitate the financial transfers, logistics, or insurance associated with these or other petroleum shipments are at risk of being targeted by the United States,” OFAC warned. This advisory represents a clear shot across the bow of the numerous private sector firms whose services an illicit export network would need to procure. To avoid potential sanctions, these firms must ensure they are not engaged in collaboration with Iran or the Assad regime.

By listing the names and hull numbers of 35 ships involved in illicit oil shipments, the OFAC advisory indicated that the U.S. government has specific knowledge of the firms involved. Independent analysts had already identified several of these vessels using open source data. For example, the Sea Shark made five voyages from Iran to Syria in late 2017 and early 2018, delivering 4.7 million barrels of crude.

Exerting pressure on private sector vessels and firms is likely to be effective, because they need access to foreign markets, the U.S. dollar system, and trusted insurers. If American pressure deters these ships from further involvement, Iran may start employing tankers from the state-owned Islamic Republic of Iran Shipping Lines (IRISL) and National Iranian Tanker Company (NITC), both of which are already under sanction.

A comprehensive effort to increase economic pressure on the Assad regime depends on taking decisive action against illicit oil shipments from Iran, whose value may now be $150 million per month or greater. In the absence of vigorous and full enforcement, sanctions evasion networks have reconstituted themselves repeatedly. If private sector firms continue to participate in sanctions evasion, OFAC should target them rapidly and publicize such action throughout the petroleum and shipping industries.

Escalating pressure on Damascus should be an integral part of the U.S. maximum pressure campaign against Iran, since Tehran is heavily invested in Assad and will spend scarce resources in the hopes of saving him.

Andrew Gabel is a research analyst at the Foundation for Defense of Democracies, where David Adesnik is the Director of Research. Follow them on Twitter @Andrew_B_Gabel and @adesnikFollow FDD on Twitter @FDD and follow FDD’s Center on Sanctions and Illicit Finance @FDD_CSIF. FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy.


Iran Sanctions and Illicit Finance Syria