An Indonesian officer on guard in front of a naval vessel in a file photo. Photo: Twitter

JAKARTA – The discovery of two super-tankers conducting a sanctions-busting transfer of Iranian crude oil off the west coast of Kalimantan underscores the heightened surveillance operations conducted by the Indonesian Navy and Coast Guard across the vast archipelago over the past four years.

“This is new to them,” says one naval analyst, noting that the mid-ocean transfer was a breach of United States, but not United Nations sanctions. “Although they’re doing a great job, Indonesia’s maritime laws may have to be re-evaluated to deal with a lot of these issues.”

It is only recently that the Indonesians discovered transiting Chinese research ships have been deactivating their automated identification systems (AIS) in Indonesian waters, during which they are suspected of releasing drones to map the seabed.

Protecting Indonesia’s 1.8 million square kilometers of archipelagic sea is a  major challenge but since a serious incident involving a Chinese Coast Guard vessel in 2016 authorities have been paying far more attention to satellite tracking services to identify suspicious ship movements.

“Their maritime domain awareness has expanded significantly,” says the analyst. “Much of the stuff they use is off the shelf, but now they have become aware of what is happening in their own backyard they are reacting in ways we have not seen before. They’re getting much better.”

The navy has increased the number of corvettes patrolling the North Natuna Sea from one to four vessels, supplemented by Coast Guard and fisheries  protection craft and periodic overflights by Pekanbaru-based F-16 jets and maritime patrol aircraft.

The Kalimantan incident may provide an early test of the Joe Biden administration’s policy towards Iran; the US Treasury Department’s Office of Foreign Asset Control has been blacklisting vessels engaged in prohibited trade with Tehran since the reimposition of sanctions in 2018.

Panamanian-flagged MT Frea, (L), and Iranian-flagged MT Horse tankers are seen anchored together in Pontianak waters off Borneo island, Indonesia, January 24, 2021. Indonesian authorities said that they seized the two vessels suspected of carrying out the illegal transfer of oil in their country’s waters. Photo: Indonesian Maritime Security Agency/Handout

Officials said the Iranian-registered MT Horse and the Panamanian-flagged, Chinese-owned MT Freya had violated rules governing passage through Indonesia’s three archipelagic sea-lanes by anchoring outside the 25-nautical mile corridor, turning off their transponders and covering up their names.

A Coast Guard patrol boat detained the 36 Iranian and 25 Chinese crewmen and escorted the two VLCCs (very large crude carriers) to Batam island, south of Singapore, for further investigation by a specially-formed multi-ministerial team.

The 163,660-ton Horse was chartered by the National Iranian Oil Company (NIOC) last September to ship 2.1 million barrels of condensate to fellow US-sanctioned Venezuela. It returned to Iran in October carrying Venezuelan heavy crude.

It is understood navy trackers have this week been following the progress of a second Iranian tanker through the 933-kilometer Malacca Strait, one of the world’s most heavily used waterways.

The International Maritime Organization (IMO) requires merchant ships to use their transponders for safety and transparency but they can turn off their AIS if they are facing a threat of piracy or similar hazards.

The Indonesian Foreign Ministry has yet to respond to an Iranian Foreign Ministry request for further information on the January 24 seizure. An Iranian statement claimed the incident was due to a “technical issue and this kind of thing has been known to happen in shipping.”

The Maritime Security Agency (BAKAMLA) says the sanctions issue falls outside its jurisdiction, but it is not clear whether the Indonesian government feels bound by America’s unilateral constraints or is taking its lead from the UN.

The Coast Guard cutter KN Marore-322 picked up the two tankers on radar when they were anchored without lights about 60 kilometers west of the West Kalimantan provincial capital of Pontianak.

Indonesia and China are at rising maritime loggerheads amid rising Chinese incursions into Indonesia’s exclusive economic zone. Image: Twitter

As the patrol craft approached, the Horse had only just begun illegally transferring  2.2 million barrels of crude to the Freya, whose owner is listed as Shanghai Future Ship Management. 

The Freya’s signal was last received by a satellite commercial service on January 2 as the 160,000-ton carrier neared the northern end of the strait between Batam and Bintan islands and Singapore, according to the Pole Star tracking service.

“The Indonesians may not choose to do anything,” says the analyst. “I don’t think they will seize the shipment, but they want to make it clear that they don’t want this sort of thing happening in their waters.”

Officials are believed to be contemplating charges under Regulation 42 of the 1973 International Convention for the Prevention of Pollution from Ships in which vessels engaged in ship to ship transfers within a country’s territorial waters or EEZ must give 48 hours’ notice and also provide details on how it will be carried out.

Despite US sanctions, China has long been the main buyer of Iranian oil, though imports of crude and condensate fell from 400,000 barrels to 225,000 barrels a day in the second half of 2019 and appears to have stayed at that lower level through 2020.

S&P Global Platts recently reported that a large share of the Iranian oil flowing to China in recent months has been going through the United Arab Emirates (UAE) and Malaysia, both of which were described as popular hubs for ship-to-ship transfers.

Last September, the US sanctioned six Chinese firms, including two affiliates of Cosco Shipping Line, for trading oil with Iran. Headquartered in Shanghai, Cosco operates 423 container ships, making it one of the largest fleets in the world.

Only last month, outgoing US Treasury Secretary Steven Mnuchin claimed that China had effectively cut its purchases of Iranian crude to zero, telling reporters: “The China state companies are not buying oil from Iran.”

In the murky world of sanctions-busting, there are frequent reports of Iran-linked tankers “spoofing” or falsifying their locations and disguising their identities, some of them taking the names of ships that have already been scrapped.

Many countries will only comply with UN sanctions. In 2018, the European Commission declared the US sanctions against Iran to be null and void in Europe and banned European citizens and companies from complying with them.

An oil production platform in Iran’s Soroush oil fields. Photo: Agencies

Indonesia’s position is ambivalent, but last year it joined 13 other countries on the 15-member UN Security Council, which decided not to take any further action on a US bid to trigger a return of UN sanctions against Iran.

Washington was not happy. “Let me make it really, really clear: the Trump administration has no fear of standing in limited company on this matter,” said US Ambassador to the UN Kelly Craft. “I only regret that other members of this council have lost their way and now find themselves standing in the company of terrorists.”

Indonesian businessman Sunarko Kuntjoro and three of his companies were charged in a US district court in December 2019 with unlawfully exporting US air plane parts to an Iranian airline between 2011 and 2018. The case has yet to be resolved.

Kuntjoro, 68, is a former vice president of Indonesia’s Garuda national airline, where he was responsible for engineering and maintenance while serving under disgraced CEO Emirsyah Satar, who last year was sentenced to eight years imprisonment for bribery.

Only last month, the US Justice Department reached a US$1.5 million settlement with a company owned by Indonesia’s richest family, the Hartonos, for 28 violations of trading sanctions imposed on North Korea to pressure it into abandoning its nuclear weapons program.

PT Bukit Muria Jaya (BMJ), a subsidiary of tobacco giant Djarum, also entered into a deferred prosecution agreement with the Justice Department for allegedly conspiring to commit bank fraud in connection with the export of cigarette papers to Pyongyang.