Why do most oil tankers carry the flags of certain countries?

Mohammed Benkasem

Following the detention of the Crown Prince of Gibraltar by an Iranian oil tanker on July 4 on suspicion of violating the European oil embargo on Syria, several implications, including the ownership of the carrier and the flag-flying state.

On the following day, the Panamanian Maritime Authority announced that the "Grace 1" tanker, carrying 1 million barrels, had been written off its records of international ships as of May 29.

Panama attributed the write-off to an ultimatum that the oil tanker was used to finance or link to terrorism, in a clear reference to US sanctions against Iran.

Although the tanker is flying the Panamanian flag, Iran has claimed ownership of it and has described its detention by the Gibraltar authorities as piracy.

Why do so many oil tankers roaming the seas of the world flags of countries that are not the owners or manufacturers, but the flags of small countries led by Panama and the Marshall Islands and Liberia? And how was this affected by the US tightening its sanctions on the Iranian oil sector, whether under President Donald Trump or former President Barack Obama before the signing of the Iranian nuclear agreement in 2015?

UN statistics
According to United Nations statistics on maritime transport, most of the world's commercial vessels are registered in countries other than those made by them or whose owners hold their nationality.

According to the annual report of the United Nations Maritime Trade Organization for the year 2018, Panama, the Marshall Islands and Liberia - respectively - are among the world's leading commercial vessels, including oil tankers, and thus carry their flags.

The report notes that in Panama there were 7914 commercial vessels, 8.4% of the world fleet and 17.4% of the world's total tonnage, while the Marshall Islands recorded 3,419 ships (3.6% of the total and 12.3% of the cargo) 3321 vessels were registered (3.5% of the number and 11.6% of the cargo).

According to the UN statistics for 2018, there are 94 thousand and 171 commercial vessels in the world, with a total tonnage of 1.92 billion tons. Cargo and cargo ships account for 42.5% of cargo, followed by oil tankers (29.2%), while container vessels account for one third of cargo.

international law
Under international law, every commercial vessel is registered in a sovereign State called the flag State, which requires the State to monitor the respect of registered ships for regulatory requirements relating to its equipment and crew and safety and environmental procedures.

The owners of commercial vessels in the world resort to certain countries to register their vessels for reasons related to the ease of registration procedures, and the low fees, and the low taxes on this activity, and also to seek countries with less restrictive legislation regarding the wages of workers in commercial vessels and working conditions.

This practice - the registration of commercial vessels in countries other than those made or owned - began in the second decade of the twentieth century when shipowners in the United States began registering their ships in Panama to escape regulatory restrictions and high labor costs in their country.

Iran sanctions
In recent years, tensions between the United States and Iran over Iran's nuclear program and Tehran's regional influence have had repercussions on commercial ship registration, especially oil tankers, as Washington sought to tighten its grip on Tehran's oil export revenues.

In February, Panama's shipping authorities canceled 60 registered Iranian vessels for links to the financing of terrorism and the threat to international peace and security. The Iranian National Shipping Company has registered more than 50 ships in Panama after the United States lifted its sanctions in 2016 under the nuclear agreement.

The United States, after withdrawing from the deal in May 2018, reinstated sanctions on shipping companies in dealing with Iran.

A few years ago, in August 2012, Tanzania announced the cancellation of the registration of 36 Iranian oil tankers flying Tanzania's flag without the knowledge or approval of the latter after members of the US Congress accused Tanzanian authorities of raising their flag on Iranian oil tankers despite Washington sanctions. Tehran.

Raising the flags of other countries on Iranian ships conceals the origin of their ownership and thus makes it easier for carriers to cover insurance and finance their shipment, as well as to find buyers for their cargo without attracting the attention of the United States, which monitors the implementation of sanctions against Iran.

Iran has replaced the flags of countries like Tuvalu and Tanzania with European flags flown by carriers such as Malta and Cyprus. The Iranian National Tanker Company also changed the names of many of its oil tankers from Persian to English before a European ban on Iranian crude entered into force in July 2012, before the matter changed and EU countries lifted sanctions under the Iranian nuclear deal.