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* U.N. group wants to cut illicit offshore fuel transfers
* Monitors send letter seeking support from major traders
* North Korea sanctions ramped up after missile tests
* Traders say they take steps to prevent sanctions-busting
By Julia Payne
LONDON, May 22 (Reuters) - A U.N. monitoring group wants toenlist the help of the world's biggest oil trading companies toenforce sanctions that cap the amount of crude and relatedproducts North Korea can import, the coordinator said.
The U.N. Security Council ramped up sanctions last yearafter North Korea said it had conducted missile tests that putthe U.S. mainland in range of its nuclear weapons.
Under the restrictions, Pyongyang is limited to importing 4million barrels of crude and 500,000 barrels of products a year.
But the panel of experts appointed by the Security Councilsaid in March that additional fuel was being sold to North Koreavia illicit deals involving transfers of petroleum from largeships to smaller vessels at sea to evade detection.
The panel said in its March report that it had investigatedat least four such transfers and was "also investigating severalmultinational oil companies for their roles in the supply chainof petroleum products".
Hugh Griffiths, the U.N. monitoring group coordinator, toldReuters he was seeking support from the top traders to helpimplement sanctions and proposed clauses that they could add totheir oil deals to prevent fuel ending up in North Korea.
He said the big traders "represent the choke point in thesupply chain and if all the big ones sign up and make this theindustry standard ... all smaller players will have to comply".
The panel sent a letter in May to 10 major traders operatingin the region, outlining the recommended contract clauses. Theletter was also sent to regional refiners and some specialistfirms, mainly in Singapore.
Griffiths, who did not identify the 10 firms or the othercompanies targeted, said all the firms had been asked to respondwithin a month of receiving the letter. A list of those thatfailed to reply would be published after that period, he said.
REQUIRING PROOF
In its March report, the U.N. panel named Switzerland-basedTrafigura as a trader that initially handled fuel thateventually ended up in North Korea in ship-to-ship transfers. Itwas the only multinational named in the report on the issue.
Trafigura denied involvement in the illicit trade and saidit had no knowledge that its fuel would end up in North Korea.
Ben Luckock, Trafigura's co-head of risk, said his firm hadconsulted with U.N. officials and had added new clausesrequiring proof of a cargo's final discharge.
"We are also stipulating that buyers require that vesselsthey use for such cargoes do not switch off their AutomaticIdentifier System (AIS)," he said, referring to a ship'ssatellite tracking system.
Several major firms active in Asian trading said theyalready had measures in place to prevent sanctions-busting.
A spokeswoman for Royal Dutch Shell, who did notsay whether the firm had been sent a letter from the U.N. panel,said the company had clauses prohibiting clients selling tocountries under U.N. sanctions, while BP said it compliedwith all sanctions requirements.
Vitol said it had "robust" compliance proceduresin place, while Mercuria said it was "always happy to helpinternational bodies to bring additional transparency on theseissues".
Glencore and Gunvor, two other major oiltraders in the region, had no immediate comment.
Griffiths said the main focus was on free-on-board (FOB)contracts, in which a seller hands responsibility to the buyeronce a cargo is loaded on a ship. Typically, the contracts havea final destination clause but no further proof of a cargo'sfate is usually required after the sale.
"Once the product is sold, they don't really pay attentionto what happens afterward," Griffiths said.
He said traders, or those selling the cargoes, "should beimplementing end-use verification measures which means that if aproduct is delivered to another ship ... all details of theshipment are provided", including official documents showingthat a cargo's entire volume was delivered to a ship or port.
He said clauses should prevent a ship with a fuel cargo fromturning off its AIS and an insurer could invalidate a policy ifthe AIS was switched off.
In March, the Security Council blacklisted dozens of shipsand shipping firms over oil and coal smuggling by North Korea.The United States also imposed sanctions on dozens of firms toshut down what it said was illicit oil and coal smugglingactivities.
Griffiths said the U.N. panel was also "investigatingmultiple companies particularly down the supply chain, smallerbrokers" over suspected violations. He did not name the firms.
(Reporting by Julia PayneEditing by Edmund Blair)
