COLUMN | Taking on the dark tanker fleet, part III: Palau, the Cook Islands and the Swedbank precedent; Frontline explains two-tier tanker market [Offshore Accounts]

When I started to research the sordid business of the Dark Fleet of over 500 tankers that transport Russian, Iranian, and Venezuelan crude in the face of western sanctions, I assumed that the flags of the vessels were making big bucks from selling their sovereign rights.

The evidence of the Marshall Islands, a very respectable registry with a huge fleet of mostly well managed ships, suggests that there is not significant financial benefit to the states that manage open registries.

We learnt that the government of the Marshall Islands received around US$11 million for flagging 186.9 million GRT of the 4,231 ships under its registry in 2023 – just US$2,600 per vessel.

This is peanuts in the wider scheme of even a Pacific Island economy, especially as the Marshall Islands, like all International Maritime Organisation (IMO) member states, has to pay membership dues to the United Nations body. These are based on the GRT and number of vessels in each registry. In 2020, the Marshall Islands paid the IMO around US$4 million, so the net amount retained by the flag is less than the headline revenues.

Black boxes with no transparency

The Dark Fleet registries are complete black boxes, far less transparent than the Marshall Islands. It is not clear how the states benefit from flagging old and dangerous tankers, or who profits from the private companies that operate many of the registries.

We have looked at Gabon, fast becoming notorious for maritime accidents and fatal incidents onboard its vessels, and its totally opaque relationship with the registry manager it has contracted, Intershipping Services in the UAE.

Prestige Falcon goes down – along with Comoros’ reputation

The downside to flags that register Dark Fleet vessels from increased enforcement from port states against their ships is probably greater than the financial benefits those flag states make from their involvement with such ships.

Following the sinking of the Comoros-flagged tanker Prestige Falcon off Oman in July, with the death of seven seafarers, it is clear port states can do more to protect their coastlines and seafarers working in their waters by simply banning vessels from low quality registries from their ports.

Prestige Falcon was thankfully in ballast when it rolled over and sank, but Comoros has a dreadful reputation as a flag (its port state inspection ranking under the Paris MOU is lamentable), and we would suggest that the UAE and the Gulf States more widely might want to look at the value that flags like Gabon and Comoros add in their respective ports and waters.

We have highlighted how the UAE is cracking down on vessels registered with flags of dubious quality, recently blacklisting several of the more extreme examples, including Eswatini (the former Swaziland) in addition to bans on vessels registered in Albania, the Congo, Cameroon, and Sao Tome, amongst others.

We suggested that the good folks at the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury might want to look at whether flags that repeatedly accept Dark Fleet vessels into their registries could hypothetically be cut off from the US dollar clearing system.

In the United Kingdom, the Office of Financial Sanctions Implementation (OSFI) performs a similar role to OFAC. Both the UK and the US have sanctioned ship owners and managers so far, but not yet any private companies running registries used by the Dark Fleet. Will that continue?

This week we look at how several organisations with close links to western countries, including the US and New Zealand, have so far managed to continue to operate, despite connections to vessels in the Dark Fleet.

Palau International Ship Registry – an American company!

The most glaring example is Palau, which has struggled to enforce standards on its vessels despite the high promises of its Greek CEO, Panos Kirnidis. What is amazing about the Palau International Ship Registry (PISR) is that it is appears to be run by an American company based in Houston, which received the exclusive right to operate the Palau flag in 2012.

It won this right through a process that I have not been able to document in the public domain. It is not clear how this private American company came to have this privilege to run the registry, or what right of recourse the Palau government has when a register brings the country’s reputation into the spotlight of negative publicity. Since beginning from humble roots in Houston, the company has built up a network of offices, including in Piraeus.

Mr Kirnidis said in an interview in 2017 that the efforts of the Paris MOU countries to inspect and sanction substandard vessels calling at their ports and publish the results "is highly disadvantageous to new registries such as Palau, even though our services and credentials can be ranked as among the finest in the industry. To climb the rankings, we have to be seen as whiter than white and yet the very statistical formula negates our chances of progress. You can have 12 of the best vessels sailing the world's oceans but if one or two fail an inspection, then by sheer lack of numbers you end up on the blacklist.”

From bad to worse

Since then, the Palau registry has gained an appalling reputation as a flag state, even before its connections to the Dark Fleet are considered. It is on the Paris MOU port state inspection blacklist in Europe, with 10 per cent of the 334 inspections reported in 2021 to 2023 period resulting in Palau flag vessels being detained – a worse score than those of Albania and Iran.

We highlighted the shocking death of Georgian seafarer Giorgi Tsilosani in April, when there was an explosion at a shipyard in Dalian on board the 1999-built Eliak. This is a Palau-flagged Aframax tanker owned by Indian interests, apparently with a history of carrying sanctioned oil. The motorman died in a fireball on deck, captured in a horrific video, and his relatives complained the flag had done nothing to investigate the incident or compensate them.

Serafina – Palau standards down the toilet after tanker gets detained in Israel

In July, the registry received further negative publicity when the port state authorities in Israel detained the Palau-flagged general cargo vessel Serafina for 28 deficiencies, 18 of which were class defects.

The International Transport Workers Federation published grim photos of the vessel’s excrement smeared toilets on its website, and cited “no employment contracts, food storage freezers all at above 0°C, the stench of rotten meat, a bug infestation, broken sanitation facilities [and] inhuman conditions” on board.

Despite all these problems, the excellent Michelle Wiese Bockmann reported that Palau registered 12 new tankers to its registry in the first seven months of this year, with four million DWT of tankers added to the fleet, just behind Gabon, which added 73 new tankers with an additional six million DWT flagged in the same period, including from Russian owner SovComFlot.

Nice work for both the PISR and Intershipping Services. More tonnage, more fees into their private bank accounts – but without more public disclosure, nobody knows how much cash they took from the often anonymous vessel owners, or what due diligence they conducted on the ultimate beneficial owners of the vessels they newly registered.

The same themes over and over

Again, Palau as a state does not seem to have benefitted much from selling its sovereign right to register ships and delegate it to a foreign private company.

Again, there is a complete lack of transparency over the funds the registry provides to the government of Palau. In 2017, local newspaper The Island Times reported that in the preceding year, 2016, the PISR had contributed US$500,000 to the government of the Pacific Islands, when it has 275 active vessels in the registry, in addition to the US$250,000 it has contributed per year in the period 2012 to 2015.

Is it worth Palau taking on massive risks if tankers flying its flags cause pollution for such paltry sums?

We have highlighted that under international regulations, coastal states harmed by the negligence of a flag state to enforce safety standards could have the right to claim at the International Tribunal of the Law of the Sea in Hamburg.

Registration suspended for sanctioned gas carriers

Eliak was not the only vessel with ties to the Dark Fleet with which Palau has been involved. Only last week, Palau suspended the registration of three LNG carriers in response to recent US sanctions imposed on vessels linked to Russian gas exports. OFAC sanctioned Asya Energy, Everest Energy, and Pioneer on August 23, 2024.

According to a PISR statement circulated to the marine press, it was investigating whether these vessels violated sanctions by engaging in deceptive practices.

Really?! Bloomberg and TankerTrackers.com had already highlighted that Pioneer had loaded cargo at the sanctioned Arctic 2 LNG facility in Russia – and then the vessel was caught on satellite footage in an illicit ship-to-ship transfer in the Mediterranean.

As early as 2021, investigators were calling out the Palau-flagged tanker Caliope for loading Venezuelan crude and spoofing its Automatic Identification System (AIS).

The fact that the Palau registry is run by an American company, with offices also in the EU and a Greek CEO, means that it ought to be extra vigilant on its sanctions compliance. The government of Palau might also want to look at why a registry it authorises to act on behalf of the state has such a patchy reputation for quality and standards.

How exactly do the people of Palau benefit from such a registry? Who owns the company that runs the Palau registry and how is it regulated by the government that delegated its sovereign rights away? And what can the government of Palau do to ensure that the PISR is enforcing standards and is avoiding registering Dark Fleet vessels into its flag?

The recent events with the squalid Serafina and the sanctioned Pioneer suggest a lot of work needs to be done in Palau.

The Cook Islands – close to New Zealand, far from godliness

Like Palau, the Cook Islands is another Pacific micro-state that has emerged as one of the largest dark fleet registries, taking on huge numbers of ageing tankers carrying Russian, Iranian, and Venezuelan crude. It became a top thirty registry in 2024 and with over seven million DWT of tankers newly registered in 2024 up to July.

Again, this is a private registry run by a private company, Maritime Cook Islands. This company puts out very little about itself on its website –peculiarly, it appointed a Greek gentleman as CEO in 2019, and this individual previously ran The Hellenic Silk Company and worked for George Economou at Cardiff Marine.

It is not clear how or why he was deemed suitable for the job, other than being from a major ship-owning state. Then in 2022, he was succeeded by a trio of managers as "Co-CEOs."

The Cook Islands Finance Department simply says that "Maritime Cook Islands (MCI) is a Cook Islands domestic company owned by resident Cook Islanders," but doesn't say who they are.

There is finally some visibility in Rarotonga

However, almost uniquely, the Cook Islands has two things which the other dark fleet registries seem to lack. Firstly, a transparent, publicly issued government budget.

This shows that the government made about US$100,000 (the budget is in NZ dollars, the Cook Islands currency) from shipping registrations in 2022-2023 budget year, peanuts compared to the risks it takes on as the flag state (see page 201 in the budget link above for the revenue).

The private company that runs the Cook Islands Register, Maritime Cook Islands, also pays the government the same amount as it pays in IMO subscription fees (note on page 63).

If the Marshall Islands thought it was getting a bad deal from its private ship registry, the Cook Islands seems to be getting an appalling one. US$100,000 would not even pay for a decent lawyer in the hypothetical situation that the government is sued by an aggrieved party for failing to enforce maritime safety standards.

Clearly the government is not getting rich off the millions of gross tonnage of tankers it is registering. So, who is?

This is where the second element comes into play. In order to get off the Financial Action Task Force blacklist, the Cook Islands had to implement more transparency in its financial and business affairs.

Maritime Cook Islands

Aided by Australian aid agency AusAid, the Cook Islands government opened up its corporate registry, so that much more information about company owners and directors is publicly available. As a member of the public, you can sight some information on Maritime Cook Islands Limited here.

However, in order to see the list of filings in the Entity Search, you have to register as a member and pay some fees. Crucially, and unfortunately, the accounts of the company are not listed.

The Cook Islands registry has denied that it is involved with the Dark Fleet, but it appears that two of its three directors are citizens of a country that has placed sanctions on Russia, and on certain Russian-linked ships and companies.

No problem, says the registry

The registry has attempted to claim that it is not aiding and abetting the Dark Fleet. It told Ms Weise Bockmann that it had deflagged 12 tankers since May this year “for breaching Western sanctions on Russia or Iran.”

Its executive director, Tony Manarangi, reminded the journalist that, “trade in Russia oil was permitted as long as the price cap is enforced,” and that only the US prohibited trade in Iranian oil, but Europe or the UK didn't.”

Maritime Cook Islands “rejected any assertion that tankers on the Cook Islands register are part of the 'dark fleet',” Ms Weise Bockmann reported.

However, she highlighted that at the time, less than five weeks ago, the registry still flagged ships that were managed by sanctioned entities – being the Radiating World and Star Voyages fleets – and that 26 of its tankers were also insured by Ingosstrakh, which was designated by the British government as a sanctioned entity in June.

Three directors, including two Kiwis

It is in the documents in the corporate registry where things get interesting for Maritime Cook Islands. One is its directors is Mr Tony Manarangi, who was mentioned in Ms Weise Bockmann’s hard-hitting expose above.

The other two directors appear to be New Zealand citizens, according to the company’s 2024 corporate filing in Rarotonga, being Joshua Mitchell and Glenn Hardy Armstrong. The company is also owned by three corporations, one of which, Armstrongs Investment, appears to be connected, at least on the basis of its name, to one of the New Zealand directors.

Now, the government of New Zealand has placed strict sanctions on Russia since the 2022 invasion of Ukraine. The sanctions guidance from Wellington makes it very clear that “sanctions also apply to Russian and Belarusian vessels and aircraft.”

The New Zealand government explicitly states that “the sanctions prohibit New Zealand individuals and entities from having dealings with sanctioned persons, assets, services, and securities.”

Self-certification is not enough

We noted Mr Manarangi’s comment that the sanctions cap only prohibits trade in Russian oil above US$60 per barrel, whereas crude oil generally trades around US$80 per barrel today.

It’s here that we observe that simply taking the word of a shell company ship owner that it is compliant with the rules is not enough. Like insurers, ship registries and other service providers have to do more than simply allow owners and charterers to self-certify that they are compliant with sanctions.

Palau, the Cook Islands, and the other registries connected to the Dark Fleet should consider the case of Swedbank Latvia’s US$3.4 million fine for sanctions compliance failings in 2023.

As OFAC tells it (our highlight in bold):

“Around March 2016, [one of Swedbank’s customers] attempted to send payments related to his business from an IP address in Crimea using the e-banking platform to a US correspondent bank, which rejected the payments citing a potential connection to Crimea and alerted Swedbank Latvia. Swedbank Latvia attempted to obtain additional information from this US correspondent bank and requested additional information from the [customer]. Swedbank Latvia did not receive a response from the US correspondent bank and the [customer] falsely assured Swedbank Latvia that none of the transactions involved Crimea. Based on this representation, a relationship manager at Swedbank Latvia re-routed the rejected payments to a different US correspondent bank, which ultimately processed the transactions. 

Swedbank Latvia had reason to know that the client’s assurances that the transactions did not involve Crimea were incorrect. When Swedbank Latvia onboarded the client… Swedbank Latvia obtained Know Your Customer (“KYC”) data, including addresses, telephone numbers, and a customer questionnaire, clearly indicating that the client had a physical presence in Crimea. This information was in Swedbank Latvia’s possession at the time of the Apparent Violations.”

This highlights an important element to sanctions compliance. It is not enough for flag state registries and insurers simply to take the word of their customers that they are following the Russian oil price cap and that the ships they are registering are not subject to sanctions.

They should be conducting their own due diligence; otherwise, like Swedbank, they can face penalties in the US and elsewhere. That is especially true if they are owned or managed by nationals of countries that have sanctions on Russia and Iran in place, or if they are companies registered in those countries that have sanctions in force.

The Cook Islands as a country does not seem to be benefiting from the registrations of dozens of tankers, and a private company profits from its burgeoning numbers of tanker registrations that the industry press has highlighted are sometime connected to the Dark Fleet.

Sanctions compliance is not easy, but in order to drive up safety standards, the Dark Fleet needs to be eliminated. If Russia, Iran, and Venezuela wish to flag their own tankers and insure them, and use them to export their own oil and gas, that is their prerogative as flag states.

Open registries should be careful that they are not violating sanctions themselves by registering vessels from the Dark Fleet. As Swedbank discovered, aiding and abetting the violation of sanctions can be expensive, and OFAC and OSFI have wide ranging powers.

Soon, we will look at one final New Zealand linked company which is also closely linked to tankers in the Dark Fleet.

Don’t worry – offshore will not be neglected

In the meantime, those who crave offshore analysis can be assured that we have not forgotten about Astro Offshore of the UAE being bought by Adani Ports of India for US$185 million, nor the fact that the world’s largest wind turbine installation company Cadeler managed to make a profit of less than US$200,000 for the first six months of the year from its US$1.5 billion in assets.

Nor the fact that ENI has finally received Indonesian government approval for its US$17.5 billion deepwater Northern Hub project off Borneo, which is scheduled to bring to production over 6.6 trillion cubic feet (190 billion cubic metres) of gas and 400 million barrels of condensate from the Geng North and Gehem fields.

Dodgy flag states, dubious private registries and the threat of a major oil spill from the ageing and dangerous Dark Fleet are hopefully interesting reading and provide context to the dark side of the marine industry.

And yet the offshore deals keep coming, and we will not neglect that focus, either.

Background reading

The recent analyst briefing by Frontline, the John Frederiksen-backed crude tanker behemoth, was very insightful on the size and nature of the Dark Fleet. Frontline CEO Lars Barstad has some comments on the matter:

“The compliant fleet is shrinking whilst this kind of dark or gray fleet is growing. It's supplied by the ageing of the overall tanker fleet basically. And over 20-year old vessels still do not trade in what we regard the conventional market. It creates an interesting dynamic because unless non-conventional trade continues to grow. The illicit market will soon be oversupplied as the fleet aging accelerates. So basically, vessels moving from the compliant market due to age and basically because we have zero scrapping, will, at some point here, start to overcrowd the dark or grey fleet and one should expect scrapping to start to happen in the end…

"We can question where is sanctions enforcement in this picture. And also where is IMO in respect of safety and reducing emissions, et cetera. I can assure you this fleet is not spending too much CapEx on reducing their carbon footprint… So basically, the overall feed continues to grow, as no ships are being recycled, but the compliant fleet vessels under 20 years of age is gradually shrinking..."

As well as TankerTrackers.com we recommend readers to look at the Dark Fleet data from Windward, which highlights Malta as a flag of concern as well.

Elizabeth Braw, writing for The Atlantic Council earlier this year, highlights the international legislation that makes it hard for coastal states to simply ban the transit of Dark Fleet vessels through their territorial waters, which is why OFAC and similar bodies play an outside role in clamping down on the Dark Fleet. There is no presumption of “innocent passage” of US dollars through the banking system when they are connected to Russian, Iranian, and Venezuelan oil and gas exports.