US official applauds Panama’s announcement to confiscate vessels allowed to be registered | Shipping News

The strict registration policies from Panama, the world’s largest ship registration center, come amid a crackdown on oil smuggling.

A former US official has praised a new announcement from Panama that will strip naval vessels of their domestic licenses and registrations if they face international sanctions.

On Tuesday, John Feeley, who served as the US ambassador to Panama from 2015 to 2018, told Al Jazeera that the move was “a welcome step by the new Panamanian government, which is working hard to improve the business environment”.

Panama – home to one of the busiest shipping lanes in the world, the Panama Canal – also boasts a large fleet registration since 1993.

But the country has faced growing pressure from the West to crack down on illegal trade such as oil smuggling, particularly from Iran and Russia.

“There are actually a few big registrars in the world,” Feeley told Al Jazeera. “International maritime authorities, as well as the US government and European Union member states are watching them closely … A reputational risk is at stake.”

Defending the ‘honour’ of Panama

In response to the pressure, Panamanian President Jose Raul Mulino issued a decree on October 18 that would revoke the national registration of marine vessels if approved by the US, the United Kingdom, the United Nations Security Council or members of the European Union. (EU).

The law clearly stated that such sanctions would “affect the honor and dignity of the Panamanian flag”.

“In order to maintain the Panamanian Vessel Registry without international sanctions”, the law explained, “it is considered necessary to establish a regulatory framework that allows the immediate cancellation of the registration of those vessels”.

The Panama Maritime Authority (PMA) was charged with canceling the registration.

Feeley told Al Jazeera that there are immediate consequences for vessels losing their licenses.

“If a ship is defamed, there are industry watchers who track and report where it is going and what it is doing,” he explained.

Panama is among the list of countries known as “flag of convenience”, where international ship owners can register their ships with the local government.

That allows international actors to bypass stricter regulations they may face in their own country.

Panama has long attracted international shipping companies with its relaxed regulations and low costs. Its maritime authorities count more than 8,000 ships registered in Panama.

Responding to international sanctions

Experts see the administration’s announcement as a result of pressure from the US and other allies.

But Panama has pushed back, saying the international scrutiny “discriminates” against the country.

This week, President Mulino went to Paris where he met with his French counterpart, Emmanuel Macron, and urged him to remove Panama from the list of EU tax havens.

In a press conference on Tuesday, Mulino’s office also stated that “it is unfair that Panama is included in the European Union’s list” of “non-cooperative territories for tax purposes”.

Given the importance of Panama as an important shipping route, foreign governments such as the US want to limit the flow of illegal trade in its waters.

In September, the US Treasury Department imposed sanctions on seven Panamanian-owned vessels for their alleged involvement in transporting oil to Iran’s Islamic Revolutionary Guard Corps (IRGC) or its Hezbollah affiliate.

Transport expert Mike Schuler said the announcement “is expected to have a significant impact on ship owners and operators, especially those engaged in dangerous or illegal activities”.

“Panama’s decisive actions may prompt other states to review their policies,” Schuler wrote for the gCaptain maritime news site.

Other “right flag” states have also taken recent steps to crack down on vessels involved in illegal activity.

In August, the island nation of Palau revoked the registration of three liquefied natural gas companies after being hit by US sanctions over ties to Russian gas.