Wednesday, August 31, 2011

WSJ: - Iran's Hong Kong Shipping Shell Game


A Chinese state-owned firm has been helping Iranian ships get around U.S. sanctions

This June, a merchant ship flying the Hong Kong flag and sailing under the name of the Atlantic called at the Mexican port of Lazaro Cardenas—the southern end of a trade corridor to the U.S., advertised as "the fastest route to the heart of North America." That might be unremarkable, except the Atlantic, formerly called the Dreamland, and before that the Iran Saeidi, belongs to a curious network of 19 bulk carriers, all flagged to Hong Kong and all blacklisted by the U.S. Treasury for their links to Iran.

According to a recent transcript of Hong Kong's Marine Department Shipping Register, the Atlantic is owned by a Hong Kong-registered company called Harvest Supreme Limited. Scratch the surface and Harvest Supreme tracks back to an Iranian address, as do 18 other obscure and interlinked Hong Kong ship-owning companies with names such as Grand Trinity Limited and Sparkle Brilliant Development Limited. These are the hallmarks of the global shell game with which Iran continues to dodge U.S. and U.N. sanctions.

This shell game began around 2008, when the U.S. imposed sanctions on Iran's state shipping company, the Islamic Republic of Iran Shipping Lines, or IRISL, for its role in provisioning Iran's rogue missile and nuclear programs. The U.S. Treasury also blacklisted a slew of IRISL affiliates and 123 of its ships, including all 19 of these merchant ships now flagged to Hong Kong, making it potentially a crime under U.S. law to do business with them. Treasury also began pressuring players outside U.S. jurisdiction to shun Iran's proliferators, or risk being cut off from commerce with the U.S.

IRISL responded by camouflaging much of its fleet, reflagging and renaming scores of its blacklisted ships. It parceled out some to newly minted affiliates and created shell companies abroad to serve as nominal owners. Behind the scenes, IRISL retained control.

The ships themselves remain easy to identify via their permanent hull numbers, or IMO numbers, which the International Maritime Organization issues to all cargo vessels over 300 gross tonnage. Treasury posts blacklisted or "blocked" IMO numbers on its website, and these lists are the basis for identifying the ships described in this article—all designated by Treasury for their links to IRISL. But these numbers don't always appear on cargo-shipping documentation. This can make it difficult for people to understand with whom they're doing business.

This has sparked a game of whack-a-hull. Treasury over the past year alone has added to its blacklist more than 100 additional IRISL-affiliated individuals, companies and ships, in places from Germany to Malta, the United Arab Emirates, Singapore and Hong Kong.

The game continues, or so it appears from information uncovered by my recent inquiries at Hong Kong's corporate and shipping registries, combined with interviews and information from a leading global shipping information database, IHS Fairplay, formerly Lloyd's Register-Fairplay (the source for shipping movements cited in this article).

Associated Press

In 2008, the Delight, now the Adrian, docked in Germany.

Since Iran launched its shipping shell game in 2008, Hong Kong has become the corporate home to 19 ships blackballed by Treasury as affiliated with IRISL and listed by IHS Fairplay as formerly flagged to Iran and owned by IRISL. Before these ships were reflagged to Hong Kong, they had names, according to IHS Fairplay, such as Iran Mufateh and Iran Navab. In their initial Hong Kong incarnation, most were given new names starting with "D," such as the Diplomat and Destiny. In 2009, they were renamed again. Currently, all 19 of these IRISL-affiliated ships reflagged to Hong Kong have names starting with the letter "A." These include, along with the Atlantic, such monikers as the Admiral, Adventist, Amplify, Angel, Ajax, Apollo, Agile, Alameda and-my favorite—the Alias.

By early this year, all 19 ships had gone through two rounds of nominal ownership by shell-companies registered in Hong Kong, as detailed at the time by the South China Morning Post. The U.S. Treasury has blacklisted the shell companies involved in these past two iterations, issuing the most recent bout of designations in January.

But as of late July, Hong Kong shipping registry transcripts showed that all 19 vessels had already come under new ownership, by 19 new companies not on public watch lists, one ship per company. These companies, unreported until now, have grandly generic names, e.g., Modern Elegant Development Limited (owner of Amplify) and Eternal Expert Limited (owner of Alias).

All 19 of these new ship-owning companies share the same Hong Kong address, that of their shared corporate secretary, Honorway Secretaries Limited—one of many Hong Kong companies offering incorporation services to a wide array of clients. At Honorway's small office, the only sign of these 19 companies is a lineup of green file boxes in a cramped back room. Honorway director David So Kam Hung says he has never set eyes on the actual owners. "Is anything wrong?" he asks.

Corporate documents for all 19 ship-owning companies show that each has as sole shareholder the same corporate nominee, a firm in the British Virgin Islands called Nominee Director & Shareholder Limited. For each of the 19 companies, this BVI shareholder has appointed the same sole director. That director is yet another new Hong Kong company, incorporated last November: King Power Holdings Limited.

And King Power Holdings, the linchpin of this ship-owning portfolio, leads to an address in Iran. According to Hong Kong corporate registry papers, King Power's sole director is an outfit called Kish Roaring Ocean Shipping Company (Private Joint Stock). The address for Kish Roaring is given as Unit 3, 3rd Floor, Sadaf Tower, P.O. Box 112, Kish Island, Islamic Republic of Iran. Kish Roaring Ocean Shipping Company is not on Treasury's blacklist. As far as I could discover, it has no publicly available records, history, email address or phone number.

For the 19 ships at the Hong Kong end of Kish Roaring's interests, there are two more common threads. Shipping data from IHS Fairplay shows that all have called at Iran within the past 18 months—13 of them within the past five months, four within the past four weeks. For all 19 vessels, the Hong Kong shipping registry lists as their agent a company called H&T International Transportation Limited, which according to a Jan. 15, 2011, article in the South China Morning Post served as agent for the same ships under their previous, now U.S.-sanctioned, nominal owners.

H&T is majority-owned by China's state-owned China Hualian International Trading Company, with offices in Hong Kong run by one of H&T's directors, David Mak Chi-ming. Until three weeks ago, H&T had been describing itself on its website, since at least last year, as an agent for IRISL. Earlier this month, I emailed H&T's Mr. Mak, asking if H&T is still doing business with IRISL. He ducked the question, writing back: "We are working with different principle from many years ago when we are welcome." A few days later, the paragraph advertising H&T as IRISL's agent vanished from H&T's website. But on one of its web pages, under the heading "Vessel Schedule," H&T continues to host a live link to IRISL's website. Mr. Mak did not respond to my further emailed questions and phone calls.

For Hong Kong companies to do business with IRISL and its network is not illegal under Hong Kong law. But the U.S. Treasury suggests it is risky if they also wish to do business with the U.S.

For at least the past three years, H&T's Mr. Mak has been working with the Texas foreign trade complex of Port San Antonio, to beef up shipping and air freight traffic between Asia and the trade corridor connecting San Antonio with the Mexican port of Lazaro Cardenas. In 2008, as noted in an article posted on the Port San Antonio website, Mr. Mak joined a delegation of business leaders organized by Port San Antonio to visit Lazaro Cardenas and cultivate business ties.

In a recent phone interview, Port San Antonio's vice president for business development, Jorge Canavati, said the Port San Antonio authorities have continued to work with H&T's Mr. Mak: "We're developing projects together." He said Mr. Mak had not informed him that H&T in Hong Kong has been serving as an agent for 19 ships on Treasury's Iran sanctions blacklist.

Meanwhile, at least seven of these 19 Iran-linked, Hong Kong-flagged, U.S.-blacklisted ships have visited Lazaro Cardenas in the past 15 months: the Agean, Agile, Apollo and Attribute; plus the Aquarian and Atrium this April, and the Atlantic in June. Perhaps it's time the world's sanctions enforcers took a closer look at this setup.

Ms. Rosett is a journalist-in-residence with the Foundation for Defense of Democracies.

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