Iran Earns $31 Billion Smuggling Oil to China via Shadow Fleet

Iran has evaded U.S. sanctions by exporting crude oil to China through a "shadow fleet" of aging tankers, earning approximately $31 billion and accounting for 90% of its foreign oil sales, according to the U.S.-China Economic and Security Review Commission. The covert operations rely on ship-to-ship transfers primarily conducted in the Eastern Outer Port Limits, a maritime zone within Malaysia's exclusive economic zone. Vessels obscure their identities by painting over hull numbers and covering names with tarps to avoid detection.

China actively facilitates these exports. Chinese cities register tanker owners and provide crews, while domestic firms are instructed to ignore U.S. sanctions on refineries. Despite official reports claiming no Iranian oil imports since 2022, the revenue flow reveals a sustained, large-scale trade. Oil from the shadow fleet is discharged at key Chinese ports including Rizhao in Shandong province, while Iranian exports originate from Kharg, the country's main oil hub.

The U.S. Treasury Department continues targeting these fleets, aiming to deprive the Iranian regime of funding for terrorism and weapons programs. Malaysia's Coast Guard acknowledges the shadow fleet's presence but claims it lacks direct enforcement jurisdiction in the Eastern Outer Port Limits. China's Foreign Ministry has condemned recent U.S. sanctions on Chinese oil infrastructure, calling them "illegal and unreasonable." The operation's scale underscores the limits of U.S. sanctions enforcement when major importers systematically circumvent them.