Sea Dolphin Shows Continued Chinese Interest in Iranian Oil

Last month, two Chinese vessels conducted a ship-to-ship transfer of Iran-sourced liquified petroleum gas (LPG) near the Maldives. Prior to the transfer, both vessels turned off satellite locator beacons in a seeming effort to hide their activity. Following the transfer, one vessel delivered the LPG to China.

We investigated the Chinese national who owns the Sea Dolphin, the vessel that loaded the LPG from Iran. She also owns another company in which the Chinese government has a major ownership stake.

Statements from Chinese officials make it clear that the Chinese government is not interested in helping the United States enforce sanctions on Iran. In the case of the Sea Dolphin, an entrepreneur who shares commercial interests with the Chinese government appears to be taking cues from these statements, ignoring the threat of U.S. sanctions. Despite the risk, she continues to ship oil products from Iran to China.

In June 2019, an LPG tanker called the Sea Dolphin entered the Persian Gulf with empty tanks. It then turned off a satellite beacon known as AIS that large ships use to report their location and status to other vessels. When it turned its beacon back on nine days later, the Sea Dolphin’s AIS reported that its tanks were full. This likely indicates that it loaded LPG during the intervening period. The Sea Dolphin then sailed toward the Maldives. As it approached the islands, it turned off its AIS beacon again.

Around the same time, another vessel, the Pacific Yantai, approached the Sea Dolphin and also turned off its AIS beacon. According to media reports, the Sea Dolphin then conducted a ship-to-ship (STS) transfer with the Pacific Yantai. After the Sea Dolphin unloaded the LPG it carried onto the Pacific Yantai, the latter began sailing towards China.

Turning off AIS beacons, often called “going dark,” can mask a vessel’s journey or the origin of its cargo. As we explored in an earlier blog post, ships working on behalf of the Democratic People’s Republic of Korea (DPRK) frequently use similar tactics to evade U.S. sanctions.

Ship registry records indicate that the Sea Dolphin’s owner is Hong Kong-based Kunlun Trading Co., Limited. The vessel’s ship manager is a similarly-named company, Kunlun Shipping Company Limited. (Ship managers are companies responsible for the day-to-day operations of a vessel.)

Using public records, we found that a Chinese citizen named Mao Yuhua is the director of both Kunlun Trading and Kunlun Shipping. She is also at least the 50 percent owner of the Sea Dolphin through two intermediary companies.

Kunlun Trading Co., Limited’s 50 percent shareholder is British Virgin Islands company Kunlun Holding Company Limited. Hong Kong company Rising Top Limited owns the other 50 percent.

Unfortunately, the British Virgin Islands does not disclose company ownership. Even after checking sources in other countries to see if they reveal information about the company’s ownership, we were not able to identify who is behind Kunlun Holding. However, corporate records reveal that Kunlun Trading director Mao Yuhua is a director and the sole shareholder of Rising Top Limited.

Kunlun Shipping Company Limited is 80 percent owned by Kunlun Holding Company Limited and 20 percent owned by Marshall Islands-based Sea Unity Shipping Company Limited. Mao Yuhua serves as Kunlun Shipping’s director.

Mao Yuhua, who has a major ownership stake in the Sea Dolphin, also has ties to the Chinese government.

Chinese corporate records reveal that Mao is a director of Shanghai Xinchi Petrochemical Co Ltd. Shanghai Xinchi Petrochemical in turn is the 40% shareholder of Huludao Huifeng Gas Co Ltd, a gas company based in Liaoning Province. Huludao Huifeng Gas is indirectly 48.5 percent owned by China’s State-owned Assets Supervision Administration (SASAC) through a series of intermediary companies. SASAC is the Chinese government agency that oversees the country’s state-owned entities. Additionally, Mao Yuhua is the director and general manager of Huludao Huifeng Gas Co Ltd.

This is not the first time Mao Yuhua’s shipping network has engaged in oil trade with Iran. Kunlun Shipping owns several other vessels in addition to the Sea Dolphin, two of which recently conducted STS transfers with U.S.-sanctioned vessels. It’s important to note that these earlier transfers happened when it was still possible to obtain an Iran sanctions exemption from the U.S. government. Because of this, they may not constitute sanctions evasion. Regardless, this gives us some insight into the network’s commercial interests in dealing with Iran.

Mao Yuhua appears to be a relatively small fish in China’s massive energy sector. However, because of his joint venture with a state-owned enterprise, his commercial interests are aligned with the Chinese state. As a result, we would expect him to be more responsive to state guidance than an entrepreneur without such direct state ties.

Last month, a Chinese envoy to the commission that oversees the Iran nuclear agreement said the Chinese government does not accept U.S. limits on Iranian oil exports. And more recently, the Chinese Foreign Minister stated that China resolutely opposes unilateral sanctions imposed by the United States.

Taken together, these statements create a permissive atmosphere, in which Chinese companies feel that the government tolerates continued business with Iran. That certainly seems to be the message Mao Yuhua and his companies have received.

And the Sea Dolphin is far from the only Chinese vessel “going dark” to continue shipping Iranian oil. If more Chinese entrepreneurs take a hint from the Chinese government’s statements on U.S. sanctions, we may see these numbers grow.

Photo credit: Bernard Spragg. NZ