Iranian oil tankers have been unloading millions of barrels of oil near a small port island just off the East Malaysian coast, said a report by Reuters on Wednesday, with the oil believed to be then transferred to other oil vessels in order to be shipped all across Asia - circumventing Western sanctions in the process.

According to Reuters Freight Fundamentals, who track the movement of global tanker fleets, at least two large oil tankers from Iran have been unloaded this way recently; and several more Iranian vessels are now also on their way towards the region, carrying as much as 6 millions barrels of crude or fuel oil as cargo each.

Reuters say that the tankers' destination could be the port island of Labuan, less than 10km from the coast of Sabah in East Malaysia. The island is best known as an offshore financial centre, though it has also served as an offshore support hub for deepwater oil and gas activities in the region.

"Labuan is like a no-man's land. There's no reason to be paying attention to Labuan," told a Singapore-based source familiar with floating storage operations in Southeast Asia to Reuters.

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Industry experts also say that Labuan could be an ideal place to rebrand and resell Iranian oil as it can operate as an almost mobile storage depot, where ships can come-and-go without much supervision.

Last month, the Lantana, a tanker operated by the National Iranian Tanker Co (NITC), transferred around 1 million barrels of crude oil to the Titan Ruchira, a floating storage vessel, off the tiny tropical island of Pulau Kuraman near Labuan, port and shipping industry officials said.

"That (Lantana) operation took place literally in the dark of night," said an East Malaysian-based shipping source. "They didn't even use a proper operator with experience to carry out the STS (ship-to-ship transfer)...The authorities were aware only after the fact."

Though such transfers are not technically illegal, Reuters say the dead-of-night transfer of oil in the South China Sea illustrates the lengths to which Iran will go to keep exporting its oil to skirt Western sanctions.

On Wednesday, the U.S Treasury vowed to keep up pressure on Iran, even after crude exports went down from approximately 2.4 million barrels of oil per day to 1 million.

Apart from efforts in Labuan, Iran has also resorted to other measures, including disguising their ships and offering insurance on their own tankers, in order to ensure the flow of oil money into its struggling economy.

Neither Malaysian nor Iranian government officials chose to respond to Reuters on the article.

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