EXCLUSIVE-Panama to withdraw flags from more vessels that violate sanctions

Panama will withdraw its flag from more vessels that violate sanctions and international legislation, the country's maritime authority told Reuters, following the removal of about 60 ships linked to Iran and Syria from the Panamanian registry in recent months.

After the re-imposition of sanctions on Iran by Washington in 2018, Panama's former president Juan Carlos Varela gave the green light to remove a fleet of 59 tankers from the country's registry, according to two sources close to the decision. Most of those vessels were owned by Iranian state-run companies but they also included ships linked to oil deliveries to Syria, the sources added.

A separate supertanker, the Grace 1, made its way to Gibraltar in early July, where it was seized by British Royal Marines on suspicion of violating sanctions against Syria. The vessel was fully loaded with crude suspected to be bound for Syria's Banyas refinery, Gibraltar authorities said.

The vessel arrived in Gibraltar showing the Panama name at its hull, but the Panamanian government later clarified it had been removed from its registry on May 29. "Panama will maintain its flag withdrawal policy," Rafael Cigarruista, general director of Merchant Marine from Panama's Maritime Authority, told Reuters in an emailed statement.

"Our intention is to improve our fleet's percentage of compliance, not only regarding sanctions by international organizations but also Panama's current legislation and maritime security rules," he added. Cigarruista did not provide details on coming action or targeted fleets.

The exact process leading up to the July detention of the Grace 1 remains unclear. Spain, which does not recognize Britain's sovereignty over Gibraltar, said it would study whether Britain's actions violated its territorial water claims. Iran called on Britain on Friday to immediately release the Grace 1 and warned of reciprocal measures after three Iranian vessels on Thursday tried to block a British-owned vessel passing through the Strait of Hormuz.

LARGEST SHIPPING FLEET

As the United States seeks to increase pressure on Iran, Panama says it is trying to maintain its registry clean from sanctioned ships and companies involved in wrongdoing.

Under international law, every merchant ship must be registered with a country, known as its flag state, which has jurisdiction over the vessel and is responsible for safety inspections and checking the crew's working conditions. When a vessel loses its flag, it typically triggers lost of insurance and classification if it does not immediately find another flag. Panama has the largest shipping fleet in the world with almost 7,100 vessels registered, according to specialized firm Vessels Value.

The Central American country offers foreign vessel owners easy registration, the ability to employ foreign labor, and does not tax the income of the foreign owners. Even being the world's largest, the registry has seen a decrease in its number of vessels from over 8,000 in 2017. Liberia now has almost 3,800 registered ship, followed by Marshall Islands with 4,100, according to the Vessels Value data.

Experts say an outdated and slow mechanism for registering vessels in Panama compared with other flag countries is the culprit of the falling number. Panama, which this year announced it will improve the payment mechanism for its registry to speed up the process, is also withdrawing its flag more frequently since the U.S. administration started putting pressure on allied countries to help to enforce unilateral sanctions, the experts added.

"It's very important for us as a flag country to preserve existing ties and grow closer to administrations that are members of the International Maritime Organization," Cigarruista said, when asked if Panama is following U.S. guidance on sanction enforcement.

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