Detailed reports by Bloomberg and Reuters reveal the Iranian regime’s deep dependency on oil smuggling networks to counter U.S. sanctions, with clandestine operations tied to China and Iraq playing central roles.
Bloomberg: Iran-China Oil Smuggling Network in the East China Sea
Bloomberg’s December 2 report exposed a covert oil smuggling operation between Iran and China, revealing how Beijing has been acquiring discounted Iranian oil through ship-to-ship transfers despite official sanctions. According to Bloomberg, these transfers occur “65 kilometers off the eastern coast of Malaysia” in the East China Sea.
The report noted: “China officially has not imported a single drop of oil from Iran since 2022,” yet the underground trade continues to supply approximately 13% of China’s oil needs. Iranian tankers reportedly carry out as many as 12 transfers per day in the region, facilitated by a network designed to obscure the oil’s origins.
In the first nine months of 2024, Iran is estimated to have exported 350 million barrels of crude oil to China via this method, earning roughly $20 billion, even after offering steep discounts. Bloomberg cited analysts warning of potential escalations if Donald Trump returns to the U.S. presidency, with the report stating: “The survival of the Iranian regime is increasingly tied to this clandestine oil trade in the East China Sea.”
The investigation also utilized satellite imagery and tracking data to analyze shipping patterns and confirm the activity’s scope. Bloomberg suggested that secondary sanctions on Chinese companies involved in these transactions could severely impact both China and Iran.
Classified Documents Show Iran’s IRGC Dominates Oil Revenue#IranRevolution https://t.co/genvxrs91b
— NCRI-FAC (@iran_policy) May 19, 2023
Reuters: Fuel Oil Smuggling Profits Iran and Proxies via Iraq
On December 3, Reuters published an in-depth report on a sophisticated fuel oil smuggling network operating in Iraq but benefiting Tehran and its proxies. According to the report, the operation exploits Iraq’s subsidized fuel system, diverting 500,000 to 750,000 metric tons of heavy fuel oil monthly to the black market. Some of this oil is blended with Iranian fuel and rebranded as Iraqi to evade sanctions, while other shipments are exported using forged documentation.
Reuters highlighted the role of Iranian-backed militias, particularly Asaib Ahl al-Haq (AAH), in controlling the network. The report stated: “Central to the smuggling operation is Iraqi Shi’ite group Asaib Ahl al-Haq (AAH), a paramilitary force and political party backed by Iran’s Islamic Revolutionary Guard Corps.” These groups profit directly from the smuggling scheme, which generates between $1 billion and $3 billion annually, according to estimates by intelligence sources.
The report also pointed to logistical details of the operation, including the falsification of export documents and the use of Iraq’s southern ports, such as Basra’s Umm Qasr and Khor Al Zubair. The blending of Iranian and Iraqi fuel oil, often conducted during ship-to-ship transfers, enables the sale of Iranian oil at higher prices under the guise of Iraqi origin. Reuters noted that the similarity between Iranian and Iraqi oil grades makes it challenging to detect blending after the fact.
#Iran Regime's Revolutionary Guard Engages in Smuggling Oil, Gas, Chemical Products… #IRGC #irgc_terrorist https://t.co/1J08zx4yYm pic.twitter.com/Js4WxMr6Lw
— NCRI-FAC (@iran_policy) March 8, 2017
U.S. Scrutiny and Potential Ramifications
Both Bloomberg and Reuters highlighted concerns in Washington regarding Iran’s evasion of sanctions. Bloomberg suggested that the U.S. could impose stricter secondary sanctions targeting Chinese companies, while Reuters noted that the fuel oil smuggling in Iraq had already been raised in discussions between U.S. officials and Iraqi Prime Minister Mohammed Shia al-Sudani during his September visit.
Reuters stated: “The lucrative smuggling and its links to Iran and individuals under U.S. sanctions are already on Washington’s radar.”
In April 2024, the U.S. Congress enacted the Mahsa Amini Human Rights and Security Accountability (MAHSA) Act, which includes the Stop Harboring Iranian Petroleum (SHIP) Act, aiming to close loopholes that allow the clerical regime to circumvent sanctions, particularly in the oil sector. The legislation mandates sanctions on foreign entities involved in the illicit trade of Iranian petroleum. However, reports indicate that the administration has not fully enforced these provisions, allowing Iran to continue its oil smuggling operations, thereby sustaining its economy and funding proxy activities and warmongering throughout the Middle East.
