Iran oil tanker released by Gibraltar, setting up race with the U.S.

By Jonathan Browning on 8/15/2019

GIBRALTAR (Bloomberg) - Iran is racing to return an oil supertanker to international waters after a Gibraltar judge said he couldn’t wait for the U.S. to take action that would prolong the six-week seizure of the vessel for allegedly violating trade sanctions.

The ship, the Grace 1, had been held in Gibraltar after British forces detained it last month on suspicion of hauling Iranian crude oil to Syria. While the U.S. sought to block the vessel’s release, the Gibraltar Supreme Court on Thursday said American authorities didn’t put in a legal application. Iran provided assurance that the ship wouldn’t sail to a sanctioned destination.

“In light of the assurances we have received, there are no longer any reasonable grounds for the continued legal detention of the Grace 1 in order to ensure compliance” with European sanctions, the Gibraltar government said in an emailed statement.

The decision now essentially sets up a race between Iran and the U.S. over the ship’s fate. The vessel is now on its way to a port in the Mediterranean, Iran’s Mehr news agency said, citing Jalil Eslami, deputy for maritime affairs at the Iranian ports and maritime organization.

“Separately, the United States Department of Justice has requested that a new legal procedure for the detention of the vessel should be commenced,” the Gibraltar government said in its statement. “That is a matter for our independent Mutual Legal Assistance authorities who will make an objective, legal determination of that request for separate proceedings.”

Diplomatic Row

The seizure of the tanker sparked a diplomatic row, underscoring tense relations between Iran and the West that have only worsened since the U.S. re-imposed sanctions on the Persian Gulf state last year in an effort to halt its oil exports. Tensions have been high in the region in recent months amidst a spate of vessel attacks and detentions, which have threatened shipping in the Strait of Hormuz, the world’s most critical chokepoint for oil shipments.

Following the detention of the Grace 1 on July 4, Iran seized a British-flagged vessel, which it continues to hold. The U.K. Foreign Office said Thursday that there was no connection between Gibraltar’s enforcement of sanctions and Iran’s activities near the Persian Gulf.

“There is no comparison or linkage between Iran’s unacceptable and illegal seizure of, and attacks on, commercial shipping vessels in the Strait of Hormuz and the enforcement of EU Syria sanctions by the Government of Gibraltar,” it said in a statement. “Freedom of navigation for commercial shipping must be respected and international law upheld.”

The Gibraltar government said in its statement that it held several meetings with Iranian representatives this month and last to negotiate the tanker’s fate, and on Tuesday, the Islamic Republic agreed that the ship’s final destination wouldn’t be subject to European Union sanctions.

Iran agreed to re-flag and insure the vessel, which was carrying about $140 million in crude oil to the Baniyas refinery in Syria. It will now travel under the Iranian flag.

U.S. officials didn’t immediately respond to requests for comment.

Four crew members from the Grace 1 -- the captain, chief officer and two second mates -- have been released, according to the Gibraltar government. The vessel’s captain has no intention of going back on the ship, said his lawyer John Wilkinson. "He wants to go home to India," he said. Most of the 28 crew are on board, he said.

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