This article was originally posted on VOA and translated by OKN Correspondent.
It was confirmed that around 10,000 tons of oil from South Korean oil company SK Energy were delivered to North Korea through illegal ship-to-ship transfer. SK Energy explained that this was part of normal trade and that the company was not able to see whether there was a possible sanctions violation. However, there are criticisms that there were suspicious activities including “high seas” being written as the destination for the shipment. Ham Ji-ha reports.
The United Nations Panel of Experts on North Korea recently focused on two oil trades between South Korean oil company SK Energy and a Taiwanese vessel that occurred last year.
The panel said that it is investigating allegations of sanctions violation related to Taiwan-based Cheng Chiun Shipping Agency in its 2022 report. The panel cited information provided by a member state that a vessel named Sunward operated by Cheng Chiun Shipping transferred oil via illicit ship-to-ship transfers to North Korean tankers in March and April last year.
The panel also added that Cheng Chiun operates multiple shell companies and Everway Global, one of the shell companies, purchased the oil.
The panel also attached two bills of landing and it was revealed that SK Energy was the seller of the oil. In fact, the documents show that SK Energy was named as the shipper, which is responsible for selling and shipping the product of the contract, and Everway Global was named as the consignee.
The products of the two shipments were “gas oil.” The documents show that the shipping volume was 4,989.252 metric tons for the March contract and 4,553.404 tons for the April one. The documents show that Sunward purchased and loaded its oil cargo in two shipments at Taiwan’s Taichung port. The bills of landing put “the high seas” as the destination for vessels.
According to the bills of landing, South Korea’s SK Energy sold a total of 9,542 tons of oil to the Taiwanese company and the oil was heading to the high seas through the Taiwanese Sunward.
However, the panel of experts pointed out that the first shipment of 4,989 tons of oil loaded on the Sunward was transferred to North Korea-flagged Sin Phyong 2 through an illegal ship-to-ship transfer on or around March 30 and 31 of 2021. The panel said that the oil was again transferred to another North Korea-flagged ship An San 1 on or around March 31 and April 1.
In addition to this, the second shipment was transferred to North Korea-flagged ship Un Hung on or around April 6 and 7 and then transferred again to North Korea-flagged Sam Jong 2 on or around April 7 and 8.
The panel attached 4 satellite images of those ships that transferred oil from the Sunward arriving at North Korea’s ports of Cheongjin, Nampo, and Hamheung.
The UN Security Council imposed an annual cap of 500,000 barrels, or about 62,500 tons, of refined petroleum imports on North Korea in 2017. It mandated countries that exported petroleum to North Korea to report the volume of shipping and shipping method to the UN every month.
However, there was criticism that North Korea imports more than the annual cap by using the ship-to-ship transfer method.
In fact, the volume of oil that SK Energy sold only amounts to about one-sixth of the annual cap but it was still delivered to North Korea within just four to five days without any formal reporting process.
It was reported that the oil sold by SK Energy was refined in Korea and sent to the company’s Taiwan office.
SK Energy denied that it was involved in the sanctions evasion, saying that the buyer was involved in sanction evasion while the seller was unaware of the situation.
“When selling a product, we confirm where the final destination is according to the free on board requirement,” an official from SK Energy told the Voice of America. “However, there is no way to confirm that for a product such as oil that is sold in large volume even though the destination is changed.”
The official emphasized that the company cooperated with the panel’s investigation and submitted related documents and added that “we will no longer be able to trade [if the Taiwanese company] is found out to violate sanctions.”
However, some industry insiders raised questions toward SK Energy’s explanation. Some pointed out the fact that the buyer wrote “high seas” for the destination when they were signing the contract and that SK Energy should have looked into this matter more closely.
Lee Dong-geun, CEO of Woochang Shipping, told the VOA that some tankers ship to the high seas to give oil to deep-sea fishing vessels and that stating the final destination as the high seas itself cannot be seen as illegal. However, he added that it is uncommon for a deep-sea fishing vessel to receive oil from a tanker near Taiwan where there are many ports that provide fuel service.
“I think they should have been more careful as a large Korean company,” Lee said. “There is no point of setting the high seas as the destination in Taiwan when considering the short distance [to nearby ports].”
Lee added that there is a need to look into whether the oil that was sold by SK Energy is the same fuel that ships in the area use. His point is that if SK Energy sold oil products that cannot be used as fuel for ships there in the first place, the company should have more suspicions about the high seas destination.
Various U.S. government branches, including the Department of the Treasury, have warned multiple times about the possibility of shipping companies around the world violating North Korean sanctions unintentionally. The Department of the Treasury said it encourages “oil companies to mandate that those in the supply chain conduct due diligence to ensure that each recipient and counterparties are not providing oil to a North Korean tanker, and to mandate that they perform end-use checks for ships that conduct ship-to-ship transfers,” in its North Korea Sanctions Advisory in 2019.
The department also said that “private sector maritime entities are encouraged to review the details of the underlying voyage, including the vessel, cargo, origin, destination, and parties to the transaction,” in its updated advisory published in May 2020. These advisories were all translated into Korean and were distributed to shipping companies all around the world.
Joshua Stanton, a lawyer and sanctions expert, told the VOA that UN member states are required to monitor and conduct due diligence to prevent sanctions evasion and that the Department of the Treasury’s advisories deal with various dangers of sanctions evasion that UN member states, including South Korea, can look into.
Stanton pointed out various other sanctions evasion cases in South Korea and emphasized that they show the need for a more thorough investigation, prosecution, and stricter crackdowns to close all loopholes.
