Persistent Oil Transfers in Malaysian Waters
In a significant maritime development, the Eastern Outer Port Limits (EOPL) off the coast of Malaysia has emerged as a central hub for the trade of sanctioned oil, including crude from Iran. This area, spanning approximately 1,200 square kilometers (463 square miles) in the South China Sea, about 70 kilometers (43 miles) offshore, has reportedly maintained consistent activity even amidst a five-month conflict involving the United States and Israel against Iran, and despite a U.S. naval blockade targeting Iranian ports.
Recent satellite tracking data revealed that the Iranian oil tanker, Humanity, traversed the Straits of Malacca and Singapore before heading northeast towards Malaysia's coast. Upon reaching the EOPL, the vessel reportedly deactivated its automatic identification system (AIS). Maritime security specialists suggest this maneuver is characteristic of preparations for a ship-to-ship transfer of Iranian oil to an intermediary vessel. The ultimate destination for such cargo is frequently China, which historically accounts for roughly 90 percent of Iran's crude oil exports, according to information from the US-China Economic and Security Review Commission.
The EOPL: An Unofficial Market for Sanctioned Crude
For several decades, the EOPL has functioned as an informal trading zone for oil under international sanctions, including that from Iran, Russia, and Venezuela. This practice has continued unabated, even through periods of heightened geopolitical tension. Ray Powell, director of SeaLight, a maritime security monitoring initiative affiliated with Stanford University, noted observing 62 vessels broadcasting false or decommissioned ship identities since the beginning of the year. These ships have been tracked moving between the Persian Gulf, the EOPL, Hong Kong, and ultimately, northern China.
Erica Downs, a senior research scholar at the Center on Global Energy Policy at Columbia University, explained that these vessels are integral to a network of intermediaries facilitating the sale of Iranian oil to China's independent 'teapot' refineries. The process often involves multiple ship-to-ship transfers in international waters to obscure the crude's origin. These smaller refineries, unlike China's major state-owned enterprises such as CNPC, Sinopec, and CNOOC, are less integrated into the U.S. financial system, making them more inclined to purchase discounted, sanctioned Iranian oil.
Navigational Advantages and Legal Ambiguities
Charlie Brown, a maritime security expert and director of Southeast Asia Regional Programs at the Yokosuka Council on Asia-Pacific Studies (YCAPS), confirmed that the anchorage area off Malaysia's EOPL remains as active as ever. He stated, "Before the war and [throughout] all the different phases of the conflict, there've been ships out there anchoring and conducting all kinds of different things like ship-to-ship operations."
The EOPL's appeal stems from its calm waters and strategic location – close enough to suppliers in Singapore and Malaysia, yet sufficiently distant to maintain a historically ambiguous legal status. While outside Malaysia's territorial waters, it falls within its Exclusive Economic Zone (EEZ). This designation primarily addresses issues like fishing rights and natural resource exploitation, rather than strict compliance with international sanctions at sea. The Malaysian Maritime Enforcement Agency has previously cited the area's remoteness and "jurisdictional gaps" as challenges to effective patrolling.
However, Malaysia has recently taken steps to bolster its legal framework. In June, amendments to its Exclusive Economic Zone Act were introduced to combat illegal anchoring, resupplying, or 'bunkering,' and unauthorized ship-to-ship cargo transfers within its EEZ. Despite these efforts, Brown estimates that on any given day, up to 200 ships may be anchored in the area, with approximately half potentially linked to Iran. Satellite data reviewed recently showed that over the past month, 18 Iranian-flagged oil tankers, including the Humanity, arrived in the EOPL before going 'dark.' Additionally, at least 50 U.S. or EU-sanctioned ships, including three Iranian-flagged cargo and container vessels, were observed broadcasting AIS signals in the EOPL.
Circumventing Sanctions: Financial Mechanisms and International Responses
The financing of Iranian oil transfers in the EOPL is reportedly facilitated by China's Cross-Border Interbank Payment System. This system enables oil payments in renminbi, thereby bypassing the U.S.-monitored SWIFT network, according to Geopolitical Intelligence Services, a European-based consultancy. China has not officially acknowledged its purchases of Iranian oil, and a spokesperson from the Chinese embassy in Washington, D.C., stated unfamiliarity with the transit of Iranian oil through the EOPL to China.
The Chinese Ministry of Foreign Affairs has consistently voiced opposition to what it describes as "illegal unilateral sanctions" imposed by the U.S. and its use of "long-arm jurisdiction" without U.N. authorization or basis in international law. Nevertheless, Chinese customs data offer indirect evidence of these transactions. While China reported no oil imports from Iran last year, its imports from Malaysia sometimes significantly exceed Malaysia's actual oil production, suggesting that a portion of the crude originates elsewhere.
Beijing has also actively sought to protect its domestic refineries from U.S. legal action. Following U.S. Treasury sanctions against five 'teapot' refineries in late April for purchasing Iranian oil, China's Ministry of Commerce reportedly 'blocked' the order, asserting that the sanctions violated international law. While the purchase of Iranian crude by Chinese refineries has reportedly decreased by about 40 percent since the recent conflict began, experts like Brown argue that mechanisms such as the EOPL have sustained the remaining oil sales. He concluded, "Sanctions never stopped any of this. The market mechanism, the payment mechanism, evolved because of the sanctions, but it never stopped anything. The only thing that physically stopped oil from going from Iran to China is the blockade."
