Titan Tankers Hiding Iranian Oil in Malaysia

The Port of Labuan is a "no-man's land," one source said.

Iran is hiding millions of barrels of crude oil from Western sanctions along the East Malaysian coast, using vessels tied to Titan Petrochemicals Group Ltd. [HKG:1192] (Titan) according to an investigation report by Reuters.

The report says Iran is using hired tankers operating under the Panamanian flag off the Port of Labuan as "effectively a mobile storage depot," loading crude oil from at least two tankers onto the vessels at night in recent weeks.

The activity is not illegal, but does represent a way to skirt Western sanctions, and companies doing business with the Iranian oil industry may face financial risk and the threat of losing insurance coverage.

The oil is likely to be blended or rebranded to distance it from Iran and then resold, according to anonymous industry sources, who said the Malaysian port is a good place to avoid international attention.

"Labuan is like a no-man's land," one Singapore-based source told Reuters. "There's no reason to be paying attention to Labuan."

Sources said a little-known shipping company called Glammarine Services agreed to allow the oil to be stored on the Titan Ruchira and Titan Tulshyan, vessels Glammarine had hired from Titan under a six-month charter, with Titan crews running the ships.

The firms insuring the two Titan ships said they are looking into whether the vessels broke European sanctions laws.

The ships are owned by offshore companies linked to Tulshyan Group of Singapore and operated by Titan, and Tulshyan head Rakesh Tulshyan said that if the oil is Iranian he will seek to have it removed from the ships.

"Because of my reputation, I would rather not do any business with links to sanctioned countries," he told Reuters.

Titan is currently facing a petition to wind up its business by U.S. private equity firm Warburg Pincus LLC, which says it is insolvent, and legal action with Grand China Logistics (GCL) over the sale of Titan's terminal at Quanzhou.

Chinese oil trader Guangdong Zhenrong Energy Co. Ltd., whose parent company is state-run Zhuhai Zhenrong which has been blacklisted by the U.S. who say it is the biggest supplier of refined petroleum products to Iran, has agreed to buy 89.95% of the company for HK$175 million ($22.6 million).