Malaysian maritime authorities too stretched, underfunded to stem trade in US-sanctioned Iran oil, observers say

Malaysia’s underfunded maritime authorities may struggle to contain rampant transshipment of US-sanctioned Iranian oil off its coast, experts say, as a visiting US delegation revealed that Washington’s security forces had been monitoring ship-to-ship oil transfers in Malaysian waters.

Speaking to members of Malaysian media, US Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson said the US had promulgated guidance to the Malaysian marine sector about the type of services that they are engaging in.

“These are ship-to-ship transfers, particularly at night, which we see from time to time. They are really designed to obfuscate the origin of the commodity, in this case, Iranian oil,” Nelson said.

Nelson and US Treasury general counsel Neil MacBride are in Malaysia and Singapore on a four-day trip to discuss Iranian oil issues and ways to prevent Malaysia from becoming a jurisdiction where Palestinian militant group Hamas could fundraise and move money.

Analysts say the trade may be happening despite Washington’s protests, as Malaysia’s maritime assets are notoriously poorly funded and unable to fully patrol waters, including the country’s exclusive economic zone which spans some 574,000 sq km.

“[The Malaysian Maritime Enforcement Agency], despite being Malaysia’s frontline maritime law enforcement agency, has long suffered from a lack of resources and assets to carry out its mandate,” said Thomas Daniel from the Institute of Strategic & International Studies Malaysia.

The construction of three new offshore patrol vessels for the agency has been hampered by cost issues, leading to only one having been delivered while two more needing cash injection and a prospected delivery of 2026.

The US, under its