By Al-Fassel | 2024-12-11

A new round of US sanctions on the Iranian regime's illicit sale of oil to foreign markets targets a "shadow fleet" of vessels that operate using deceptive means to transport petroleum to buyers, foremost China.

Building on previous sanctions against Iran's oil industry, the US Treasury on December 3 blacklisted 35 entities and vessels that it said play a critical role in transporting illicit Iranian petroleum to foreign markets.

"Iran continues to funnel revenues from its petroleum trade toward the development of its nuclear program, proliferation of its ballistic missile and unmanned aerial vehicle technology," said Treasury official Bradley T. Smith.

Revenues also go to its "regional terrorist proxies, risking further destabilizing the region," he said.

The US Justice Department has said Iran's oil revenues fund the Islamic Revolutionary Guard Corps (IRGC) and its Quds Force -- the Islamic Republic's main mechanism for providing lethal support to terrorist organizations abroad.

The Iranian regime relied on "a sprawling network of tankers and ship management firms in multiple jurisdictions to transport its petroleum to overseas customers," the Treasury said.

This includes "tactics such as false documentation, manipulation of vessel tracking systems, and constant changes to the names and flags of vessels."

Surge in Chinese imports

As Iran's largest trading partner and a major buyer of its sanctioned oil, China in August imported a record 1.75 million barrels per day, according to Oilprice.com.

The surge stems from Chinese refiners seeking cheaper crude amid an economic slowdown, it said, noting that Malaysia helps conceal outbound Iranian oil. Ostensible Malaysian crude oil exports to China tripled in July.

Iranian petroleum and petrochemical sales generated up to $70 billion in 2023, the Economist estimated in October.

Almost all of Iran's petroleum exports go to China, according to a US Congressional Research Service (CRS) report updated November 8.

"Iranian petroleum is often sold below prevailing market prices, reportedly at a discount compared to Persian Gulf or price-capped Russian suppliers, to entice foreign traders," per the CRS report.

Most reported China-based buyers are small, semi-independent refineries known as "teapots," it said. These are "both hard to uncover and not exposed to the US financial system," thus impairing US sanctions.

The United States has sanctioned dozens of entities for their role in shipping Iranian petroleum to Asia, the CRS said, noting that the US Congress in April enacted measures intended to toughen sanctions on Iranian petroleum.

Techniques for obscuring Iranian petroleum exports complicate efforts to identify Iran's trade patterns and apply sanctions, per the CRS report.

These ruses include relabeling Iranian petroleum and broadcasting falsified tanker route information. Countries seeking to skirt sanctions also use older tankers to avoid detection, and take longer voyages to reach their destination.