Analysis Oil & Gas US sanctions unlikely to stop Iran’s oil smugglers By Eva Levesque October 23, 2024, 3:36 PM Raheb Homavandi/Reuters A production platform in Iran's Soroush oil fields: Iran’s exports have reached a six-year high this year, supported by growing demand from China ‘Dark fleet’ network evades action Exports now at six-year high Sales worth up to $50bn a year Tighter US economic sanctions are unlikely to disrupt Iran’s oil exports in the long run because Tehran has developed a sophisticated system of oil smuggling, using a dedicated fleet of tankers and middlemen in multiple countries, industry observers say. The regime in Tehran has been under US sanctions since the Islamic revolution of 1979. But earlier this month, after Iran fired nearly 200 missiles at Israel, the US Treasury announced more measures aimed at petroleum and petrochemical products. The Treasury can now sanction “any person that operates in these sectors”. However, Armen Azizian, a senior oil risk analyst at Vortexa, a specialist consultancy based in London, says Iran has used its long experience and learned how to circumvent even the new measures. Iran’s oil keeps flowing – and that suits the US for now Iran needles the West with its growing oil production goals Iran’s energy installations may be targeted in Israeli strikes Iran has built an extensive dark fleet network, which operates irrespective of sanctions, Azizian says. Dark fleets typically consist of older ships that operate without insurance, have opaque ownership structures, frequently change names and flags, and use deceptive tracking systems to remain invisible while they transport sanctioned oil. Iran’s exports of crude oil collapsed six years ago under the Trump administration. But Francesco Sassi, a researcher at Rie-Ricerche Industriali ed Energetiche in Bologna, says the Biden administration has adopted a looser approach, “allowing some sort of diplomatic space to be built amid a rapprochement phase in the diplomacy in the Middle East”. “We are not in that phase anymore, and the Biden administration’s policy has not worked as intended. I think these new sanctions will somehow tighten Iran exports, but not to a great extent, due to increased capacity to avoid sanctions,” Sassi says. Iran’s exports have reached a six-year high this year, supported by growing demand from China. They amounted on average to 1.6 million barrels per day (bpd) in the first nine months of the year, and 1.8 million bpd in June-July, according to Vortexa. Last year, according to The Economist, sales generated $35 billion to $50 billion, with petrochemical exports accounting for $15 billion to $20 billion, according to external estimates. China, where Iran sells 95 percent of its oil, increased its imports of sanctioned crude and condensate by 27 percent year on year between January and September 2024. Iranian crude exports slipped to 1.4 million bpd in September and to about only 600,000 bpd in the first days of this month, according to Vortexa. The slowdown is likely to persist as Iran braces for Israeli retaliation. Disruptions are visible on Kharg Island in the north of the Arabian Gulf, from where more than 90 percent of Iran’s oil is exported. Under the widened US sanctions, Washington designated 16 new entities and 23 vessels which it said were shipping Iranian oil, including three companies based in the UAE. Sassi says the UAE was “a key location for those investing in covered trade operations, there are few doubts about that”. “International pressure is growing to have Middle Eastern partners aligned with Western sanctions against a growing list of several countries,” Sassi says. Ship-to-ship transfers Iman Nasseri, managing director at Facts Global Energy in Dubai, says that more companies are involved in Iranian sanctions evasion and have not yet been identified. “There have been more of such companies put on sanctions list in the past,” he says. Azizian says that out of 478 tankers in the dark fleet globally, about 240 tankers traded in the Iranian market in 2024, versus 250 vessels in 2023. “We suggest that if Iran manages to increase exports further towards the end of the year, we could actually see that level surpassed,” Azizian says. According to Vortexa, 80 percent of all Iran exports are facilitated by ship-to-ship transfers, which take place at sea and are difficult for outside agencies to monitor. Iran has also increased capacity at the southern port of Jask, outside the Strait of Hormuz. The terminal, designed to load up to 1 million bpd and store 20 million barrels, is filled to about half capacity, according to reports based on satellite imagery. Dan Rahmat, an independent energy analyst, tells AGBI that the Iranian regime can rely on more than 20 million barrels of floating reserves offshore Asia. Rahmat says that there is a network of opportunistic companies around the region which are prepared to help Iran and “are doing juicy deals daily”. “Soon, these companies will be replaced by other similar service providers,” he says.