The successive rounds of sanctions from the US on companies and tankers said to be aiding Iran have, finally, slowed the flow of Iranian oil to China, reports Forbes, with costs rising and traders still involved having to deploy more risky tactics to get round the US measures.
In recent weeks shipments have been disrupted because of a number of seller defaults, according to executives at Chinese private refineries (the buyers of most of Iran’s oil cargo exports). The refineries attributed this to logistical challenges and higher expenses making the supply chain more complex.
Some Iranian tankers had been sanctioned while en route to their destination, the executives told Forbes.
Trade with China has been a financial lifeline for Tiran for some time. The US has for some time been seeking to cut that link. The final blast of sanctions from the Biden administration saw more than 160 vessels named, as well as owners, brokers and traders. It was noted by data analytics firm Kpler that the US blacklist now covered more than two-thirds of 150-or-so vessels that handled the shipments of Iranian crude in 2024.
Two factors are in play that have helped Iran. The first is that China does not recognize unilateral sanctions and has repeatedly defended its right to trade with Iran. The second is that in energy terms the US has become less significant globally, because it has become energy self-sufficient. Indeed, it has become a major exporter to Europe.
However, although its tentacles are weakening slightly, the hegemony of the US dollar and the American financial system still holds sway for any company involved in international trade within or with the west. Chinese ports and shipping companies with links outside the mainland remain reluctant to risk dealing with sanctioned entities and vessels.
Earlier this year, Shandong Port Group – which serves a province that is a hub for private refiners – urged operators to reject blacklisted tankers.
This all means that the cost of circumventing the US sanctions has been rising. By way of example, the chartering rate for a non-sanctioned supertanker willing to move Iranian oil from Malaysia to China was pegged at between $5m and $6m in February – both a record high and some 50% higher than the same time in 2024.
The use of smaller tankers has also increased, according to Kpler data. For example, in February, a ship-to-ship oil transfer off Malaysia was conducted between an Iran oil-laden supertanker and three Aframax-size vessels, an unusually slow and expensive move. Those recipient vessels are more likely to be “under the radar”.
The complexities of dealing in Iranian oil have also had an impact on price. Traders will typically offer Iranian oil (or other such sanctioned) to buyers at a fixed differential to a global pricing benchmark. That price would include the cargo’s value as well as add-on costs of booking tankers, STS transfers, insurance and port fees. Any sudden spike in the prices of those costs can wipe out a trader’s profit overnight.
Mia Geng, a Singapore-based oil analyst with FGE Group, told Bloomberg that “faced with the prospect of shipment delays, Chinese buyers will be looking for deep discounts, which would eat into the profits of sellers and middlemen”.
All of that bad news for Iran is not, however, seen as terminal. The trade has been thriving ever since 2018 when US sanctions on Tehran were reinstated. Indeed, the impact of oil sanctions is in a way a bit like tariffs. The change in the cost system increases expenses in getting anything from point a to point b, and indeed points a and b might change, but the total flow from production to consumption does not change.
One example of the impact of increased sanctions and surveillance can be seen (but cannot be detected) in the waters off Malaysia, a hub for the Iranian crude trade. More ship-to-ship transfers have been happening with all transponders turned off. Bloomberg said that up to seven transfers were observed on a single day last month, according to satellite images. Analysts said most of them were totally “dark”. That would mean that shippers were taking more precautions as Washington points to increased enforcement.
Obscure STS transfers, processing through the more entrepreneurial refineries, and other techniques have been deployed to obscure the origin of Iranian oil. These come with a cost, which reduces the income per ton for Iran, but all Iran needs to do to compensate for that is to export more oil.
The US response thus far appears to be “more of the same, but with added testosterone”. President Trump has referred to applying “maximum pressure” on Iran. That could mean that the US will try to tighten up the application of secondary sanctions on those dealing with Tehran. While there are threats of “enforcement at sea”, it has been noted that the US has been puling back on public expenditure and physical international involvement, rather than increasing it.
Several US officials told Reuters at the end of February that the Trump administration was considering a plan to stop and inspect Iranian oil tankers, but it was not clear whether US forces and willing allies would have the capacity to carry this out.
The “old-fashioned” (and cheaper) route in the US has been to chase the money rather than the oil. That could mean that financial institutions working with private Chinese refiners who import Iranian oil might themselves be penalized. Alternatively, diplomatic pressure could be exerted on countries such as India or the UAE, where several dark fleet operators are now based