PANAMA CITY, Panama (AFP) — A United States special envoy on Wednesday urged Panama to stop Iranian ships from flying its flag, which allows Tehran to evade sanctions imposed by Washington.

The small Central American nation is the world leader in offering flags of convenience, which allow shipping companies to register their vessels in countries to which they have no link — for a fee and freedom from oversight.

“Iran and actors related to Iran are trying to evade sanctions here in Panama. They’re trying to abuse Panama’s flag registry,” said Abram Paley, US deputy special envoy for Iran.

Paley was visiting the country “to ensure Panama’s shipping registry and jurisdiction is not abused by entities attempting to evade our sanctions on Iran.”

According to the Panama Maritime Authority, the country has registered 8,540 ships, about 16 percent of the global fleet.

Washington suspects that some of them are used by Iran to transport oil or its derivatives, to bypass sanctions.

Iran has been under debilitating US sanctions since Washington’s 2018 withdrawal from a landmark nuclear deal.

According to Paley, at least six ships flying the Panamanian flag have violated these sanctions since January.

Panama’s Deputy Foreign Minister Vladimir Franco said on social media platform X that he had met with Paley for talks on “maritime cooperation” between the two countries.

The US government accuses Iran of financing Yemen’s Houthi rebels and other organizations such as Hezbollah and Hamas with the revenue it receives from oil sales.

Experts say that rogue ship owners use the flag of convenience to bypass environmental regulations and labor laws and even conceal entirely who owns a specific ship.

“We expect that the Panamanian government will continue to work with us based on their domestic laws and international obligations,” Paley said.