Last week, Iran's Revolutionary Guard seized two vessels, Panama-flagged MSC Francesca and Liberia-flagged Epaminondas, for what it described as maritime violations and transferred them to Iranian shores.
Iran later said that the two ships had “ties to Israel” and accused the ships of breaching maritime regulations, interfering with navigation systems, and endangering other vessels in the waterway.
Since the war initiated by the US and Israel against Iran began on February 28, Tehran has maintained control of the Strait of Hormuz, stopping oil tankers and container ships from passing through the crucial waterway. In retaliation, the US imposed a naval blockade of Iranian ports on April 13.
Iran and the US have both seized vessels, but these ships are often identified by the flags of the territories where they are registered.
When a tanker is seized, attacked or boarded, initial reports almost always identify the vessel by its flag, most often Panama, the Marshall Islands, Liberia, Togo or other countries.
The true beneficial owner, the individual or company that ultimately controls and profits from the ship, is rarely named in the first wave of reportage.
This is not an accident; it is a part of global maritime practice.
Why is it so?
The vast majority of the world’s merchant fleet, including most oil tankers, sails under so-called flags of convenience (FOCs).
According to various estimates, 75–80 percent of the global fleet is operating under this system.
These are open registries run by countries that allow foreign owners to register ships with few questions asked.
Panama has the world’s largest ship registry, followed by the Marshall Islands and Liberia.
Shipowners choose these flags for lower costs, regulatory flexibility and opacity.
Saving money
Registration fees, taxes and regulatory burdens are far lighter in FOC countries than in traditional maritime nations. Ship owners can also hire cheaper international crews with fewer labour protections, helping them cut costs.
In fact, the FOC system started in the 1920s and 1930s, when the US shipowners started registering their vessels under Panama’s flag to avoid strict American labour laws and taxation.
Flag states generally apply lighter oversight on safety, environmental standards and inspections.
Traditional nations like the UK and EU member states also typically have stricter rules, such as the EU Emissions Trading System, with heavy fines for carbon emissions.
They also support or require investments in alternative fuels, scrubbers, or energy-saving technologies more aggressively than many open registries.
Oil spills
Owners may use FOCs strategically after high-profile spills to shield themselves from full financial and legal responsibility in case of an oil spill.
The flag state, with limited enforcement capacity, bears primary responsibility for the vessel under the United Nations Convention on the Law of the Sea (UNCLOS), which can make it harder for affected countries to pursue the actual beneficial owners.
In 1967, a Liberian-flagged tanker sank off the coast of Cornwall, UK, spilling an estimated 25–36 million gallons of crude oil. It was owned by a subsidiary of Union Oil in the USA.
The incident caused massive pollution along British and French coasts and is widely seen as the event that put "flags of convenience" on the global agenda as the UK and France struggled to get the costs of the damage covered.
Opacity
Flying a flag of convenience is perfectly legal under international maritime law known as the United Nations Convention on the Law of the Sea (UNCLOS).
Every ship must have a flag state that bears responsibility for it. However, the mismatch between the flag state and the actual owner creates persistent transparency gaps.
Several open registries do not require public disclosure of the ship’s ultimate beneficial owner.
Ownership is frequently layered through shell companies in multiple jurisdictions, making it difficult and time-consuming to trace who actually controls the vessel.
Owners or operators linked to sanctioned entities use FOC registries or rapidly change flags to obscure connections and reduce the risk of immediate enforcement.
In December 2025, the US intercepted the Panama-flagged Sophia after President Donald Trump ordered a "blockade" of sanctioned oil tankers entering and leaving Venezuela.
In the past five years, the vessel had also sailed under the flags of Greece and Liberia, the BBC reported.
The US alleges that countries such as Venezuela, Iran and Russia employ so-called "shadow fleets" of falsely flagged tankers running dark to avoid sanctions detection as they transport “illicit oil from one nation to another”.
Flag-hopping
Flag-hopping is the practice where ship owners or operators frequently change the country of registration of a vessel, often in quick succession.
This is done to avoid detection, sanctions enforcement, port state control inspections, or de-registration by stricter flag states
In December 2025, a sanctioned oil tanker at the centre of a dramatic Atlantic pursuit highlighted the extent of “flag-hopping” used to evade enforcement.
The Panama-flagged Bella 1, later renamed Marinera, was chased for more than two weeks after refusing a US boarding near Venezuela before fleeing, Reuters reported.
During the pursuit, the vessel changed identity, renaming itself and re-registering under a Russian flag mid-voyage.
US forces ultimately boarded and seized the tanker on January 7 in the North Atlantic, citing sanctions violations tied to Iranian and Venezuelan oil shipments.
