The Indonesian Coast Guard (Bakamla) intercepted and halted the activities of MT Arman 114, an Iranian-flagged very large crude carrier on Friday, July 7, 2023.

The vessel was suspected of engaging in crude oil transshipment within Indonesia's Exclusive Economic Zone (EEZ) in the Natuna waters.

Bakamla suspected that the crew of MT Arman 114 was not only involved in transshipment but also in dumping or disposing of residual crude oil waste during the cargo transfer process at sea.

Dumping is considered an illegal activity, prompting the Ministry of Environment and Forestry's law enforcement division to investigate.

The transshipment activity of MT Arman 114 also involved another supertanker, MT S Tinos, a ship registered under the Cameroon flag.

Bakamla engages the ships in pursuits

The authorities noticed that both vessels attempted to escape when Bakamla's maritime patrol approached them to be apprehended.

The patrol continued the pursuit of the two tankers into Malaysia's EEZ, and Bakamla coordinated with the Malaysian Maritime Enforcement Agency to surround the ships.

Based on initial inspections, MT Arman 114 had 28 Syrian crew members, three passengers, and an Egyptian captain. The tanker carried 272,569 tons of light crude oil, equivalent to 2.3 million barrels, with an estimated value of Rp 4.6 trillion.

MT Arman 114 was found to have deceived authorities by disabling its Automatic Identification System (AIS) and falsifying its position in the Red Sea. Additionally, the vessel did not possess proper sailing approval or port clearance.

Common illegal oil trading practices

Ship-to-ship cargo transfers are commonly associated with illegal oil trading. The black market for crude oil is usually supplied by countries facing sanctions from the United States and other Western nations, including Iran and Russia.

Iran, being one of the world's largest crude oil producers, reportedly produces around 3 million barrels per day.

Amidst economic sanctions, widespread inflation, and social unrest, the Iranian government increased oil sales to various countries, offering significant discounts, particularly to China.

However, specific sales statistics were not publicly disclosed, and analysts estimated that Iran boosted oil exports to over 1.2 million barrels per day, delivered to China through covert shipping methods.

Black market negotiations explained

In the underground oil trade, negotiations typically occur while the goods are still in transit. Once the seller and buyer agree, funds are transferred through third-country banks, such as Oman or the United Arab Emirates.

A key element of these agreements is the Certificate of Origin (COO), which provides information about the origin of the goods.

To avoid detection, sellers can obtain a COO document from Oman or the United Arab Emirates, effectively erasing any trace of Iran or Russia.

The black market for crude oil attracts many buyers due to its significantly lower prices, with oil-exporting countries offering discounts of up to 40%.

Tempting prices

The attractive low prices led the Energy Commission of the Indonesian House of Representatives to repeatedly urge Pertamina, the state-owned fuel importer and processor, to purchase the cheap oil, especially during the surge in crude oil prices in 2022 following Russia's invasion of Ukraine. Russia even offered discounts of up to 30 percent.

Commission member Syaikhul Islam was one of the members pushing Pertamina to buy the cheaper oil, arguing that doing so would prevent fuel prices from rising and even possibly leading to a decrease.

Syaihul emphasized that the government should take a firm stance to meet the needs of the people and not fear Western nations threatening sanctions if the government buys Russian oil.