Israel issues sanctions against 18 oil tankers to thwart Iran's funding for overseas allies

Israel is aiming to choke off Iran's fundings for its overseas proxy organizations by targeting 18 oil tankers transporting Iranian oil in the country's first publicly announced shipping sanctions, government officials told S&P Global Commodity Insights amid heightened tensions in the Middle East.

On Aug. 6, Israel's National Bureau for Counter-Terror Financing, part of the Ministry of Defense, announced "seizure orders" for the ships with a total capacity of nearly 1.88 million dwt to thwart "the activity of a terrorist organization."

This refers to the utilization of those ships by Iran's Quds Force to ship Iranian crude to Syria for refining and sell refined products to external buyers, with revenues from the sales used to fund Hezbollah, Hamas and the Houthis, according to NBCTF officials.

The Houthis have claimed to attack more than 100 ships in the Red Sea and Gulf of Aden in support of the Palestinians since the Israel-Hamas war broke out Oct. 7, 2023, while Hezbollah and Israel have also exchanged cross-border fire.

An Israeli official said this was the first time that sanctions related to the shipping industry were issued, adding that "international security and, in this case, international maritime security is very important."

Data from S&P Global Commodities at Sea, which tracks 12 of the 18 ships, suggests the targeted tankers have been trading in international markets with recorded loadings from not just Iran but also Russia, Iraq, the UAE and other countries.

Their actual destinations could be mostly under the radar: S&P Global Maritime Intelligence Risk Suite data shows 15 of the 18 ships are confirmed or suspected to have turned off their ship-tracking system during their operations in the past two years.

Enforcement

The NBCTF official said Israel will take a "proactive" approach in enforcing the seizure orders by partnering with the US and European countries to ask maritime industry participants, including bunker suppliers, ship managers, and other players, to not service the ships.

Currently, just five of those ships are sanctioned by Western authorities. Two of them are covered by members of the International Group of P&I Clubs, which dominate the maritime third-party liability insurance market.

"We encourage our [maritime] stakeholders to maintain the international maritime security, which is also very, very important for them," the official said.

NBCTF declined to comment on whether the Israeli navy will physically arrest the ships if they sail across East Mediterranean, citing the sensitivity of the matter. Iran and Hezbollah have vowed to retaliate against Israel after Israel killed leaders of Hezbollah and Hamas.