Dr Justin Dargin, Senior Visiting Fellow at the Middle East Council on Global Affairs in Doha, Qatar, speaking to New Energy World, says: ‘Technically, Iran isn’t permitted to sell oil on the international market, yet it has continued to do so, exporting around 1.5–1.8mn b/d since 2023. Following the Israel–Iran war [in June 2025], exports even climbed to nearly 2.2mn b/d. That demonstrated Iran’s capacity to absorb a kinetic shock and revealed the oil sector’s resilience, particularly since Israel avoided striking the country’s main export terminals.’

An estimated 85–90% of Iran’s oil exports go to China, while exports to Syria, the United Arab Emirates (UAE), Oman and Venezuela were estimated in 2023 to be between 148,000–360,000 b/d, according to a 2024 US Energy Information Administration (EIA) report. The analysis noted that while most export destinations for Iranian crude since 2020 are listed as China, many are ‘listed as unknown’ but are ‘assumed’ to be to China as well as Malaysia, Singapore and Vietnam.

Shadow fleets, also known as ‘dark fleets’, use various methods to obscure their movements and identities, such as turning off their Automatic Identification System (AIS), faking their name or flag, and conducting ship-to-ship transfers at sea instead of in port. Some shadow fleet vessels deliver Iranian crude to ‘teapot’ refineries, small, independent oil refineries in China, primarily located in Shandong province. They are named for their compact, simple design and operate outside of China’s major state-owned oil companies.

Iran generated an estimated $43bn from oil exports in 2024, a 2% increase from the previous year, according to TradeImeX figures, although the EIA estimated there had actually been $53bn worth of Iranian oil exports in 2023.

Sanctions also have had negligible impact on deterring Russian exports. As the country continues to wage war on Ukraine, Russia has continued to find buyers for its sanctioned oil. Indeed, data from Finland’s Centre for Research on Energy and Clean Air (CREA) says Russia earned €546mn/d from fossil fuel exports in September 2025, a significant sum – even though this was the lowest level since Moscow’s full-scale invasion began in February 2022 and half of its September 2022 revenues, according to CREA. China remained the largest buyer at €5.5bn monthly, with India second at €3.6bn and NATO member Türkiye (Turkey) third at €2.6bn.

Sanctions try to plug illicit oil trades gap
New US sanctions targeting Iranian oil smuggling networks, shadow fleets and teapot refineries are aimed at dissuading importers from buying Iranian petroleum and denying export revenue. While such moves are unlikely to disrupt global oil supplies, or exports to China, they are expected to squeeze the illicit oil trade if the US aggressively enforces the sanctions.

In October 2025, the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned over 50 individuals, entities and vessels that facilitate Iranian oil and LPG sales and shipments. The new sanctions are ‘intended to render Iranian oil effectively untradeable’, explains Dargin. He adds: ‘Earlier enforcement was largely reactive, sanctioning the national oil and tanker companies rather than the broader ecosystem. The current approach aims to choke off Iran’s access to revenues from its shadow fleet, particularly those tied to the Asian market.’

The move followed sanctions in July and August targeting key enablers of Iran’s oil exports, part of US President Donald Trump’s campaign of ‘maximum pressure on Iran’.

Accurate figures are hard to come by due to the opacity of the trade and there being ‘a lot of different figures on Iranian exports to China’, notes Dr Naser Al-Tamimi, Senior Associate Research Fellow at the Institute for International Political Studies (ISPI) in Milan, Italy, and Senior Associate Fellow at the Global Institute for Strategic Research (GISR) in Doha, Qatar, but he quotes an average figure of 1.6mn b/d.

The exports are going to privately owned teapot refineries, which have been used to process Iranian oil after Chinese state-owned or linked facilities stopped facilitating such trade in 2018. They signal the opaque support for the underground trade in Iranian oil by the Chinese government. Some Chinese teapot refineries were sanctioned by the US this year, including Shandong Shengxing Chemical Company and Hebei Xinhai Chemical Group.

‘These teapot refineries are opportunistic and less exposed to US sanctions compared to the Chinese state oil companies,’ says Dr Al-Tamimi, as they are only operating in China and not overseas.

He continues: ‘But if history teaches us anything, the Chinese will continue to buy Iranian oil. China always downgrades imports from sanctioned countries, then it picks up again. And with the economy slowing down, these small refinery players will be willing to buy cheap oil with discounted offers from Iran.’

Shadow fleet expands
The ghost fleet of oil tankers transporting Iranian oil have been targeted to curb such east Asia-bound trade. Estimated to represent around 10% of the global shadow fleet, the Iranian network will likely be driven into even more opaque and risky practices to keep payments flowing, according to Dargin.

The dark fleet has become increasingly sophisticated in recent years, with voyage durations reducing from 85–90 days in 2022, to a 50–70-day range in 2025, according to Vortexa Analytics, a London-based energy trading and shipping intelligence provider. The decreased journeys were due to ‘a more disciplined, coordinated fleet operation, with fewer extended delays between load and discharge’.

Ship-to-ship (STS) transfers of oil are key to the trade, with 82% of Iran–China voyages over the past three years involving at least one such operation, typically near Malaysia or Fujairah, UAE, according to Vortexa.

While China is a particular case, being the bulk buyer of Iran’s oil, the secondary sanctions could put pressure on other countries to stop the trade to prevent being cut off from the US financial system. ‘This could raise the overall cost of handling Iranian crude and prompt some entities to reconsider whether it’s worth the risk,’ comments Dargin.

The attractiveness of the trade depends on the price of oil. Sanctions might bite Iranians, especially if oil stays around $50–60/b, according to Al-Tamimi. He continues: ‘If oil is at $80, $90 or $100, Iran can afford a 10% discount. In any case, Iran has no choice; it has to export whatever the costs. But other players – the UAE, Iraq, Malaysia, Singapore – they have a choice, so if they think it’s not worth it, they will stop.’ One possible victim of the tighter sanctions is Iraq, as Iraqi militias and other institutions have been accused of blending Iranian and Iraqi oil to be passed off as Iraqi, with this illicit trade estimated at $200–300mn/y, according to Al-Tamimi.

Even the unlikely scenario of a complete cutoff of Iran’s oil exports would have only limited impact on global prices, given Iranian crude accounts for just 1.5–2% of world oil demand, notes Dargin.

He adds: ‘The international market has largely priced in any potential disruption to Iranian crude and I don’t foresee the new sanctions having a significant impact on prices. Any effect would likely unfold gradually, over months or even years, as surveillance and enforcement tighten, rather than immediately.’

For Russia, an unregistered shadow fleet of oil tankers is increasingly being used as the primary weapon against Western sanctions, with the fleet now handling nearly three-quarters of Russian seaborne crude exports.

Russia has developed this fleet significantly. Caspar Hobhouse, a research analyst from the EU Institute for Security Studies (EUISS) estimates over 1,000 vessels. Finland’s CREA reports that shadow tankers delivered 69% of Russian crude oil exports in September 2025, with the combined share of sanctioned and shadow vessels reaching 72.5% of all shipments.

Hobhouse adds that almost all of Russian seaborne fossil fuel trade now uses the shadow fleet, and that it handles about 60% of Russia’s seaborne oil and refined products flowing through the Baltic.

Isaac Levi, an analyst and author at CREA, places the size of Russia’s overall fleet at around 600 tankers. He states that about 90% of all Russian crude oil is now going to India, the largest seaborne importer, followed by China and Türkiye.

The Russian shadow fleet’s infrastructure has grown sophisticated and dangerous. According to CREA’s analysis of the first 10 months of 2025, ship-to-ship transfers more than doubled from 8.6mn tonnes in 2024 to 19.3mn tonnes in 2025, with operations concentrated near India, China and Brunei. Now, Hobhouse notes, the most common interchange points include Suez, near Cyprus and the Gulf of Oman. Transfer hubs shifted after a crackdown on such activity by Greece from May 2024, when the Greek Navy began military drills in the Laconian Gulf, off the southern Greek mainland, to deter ship-to-ship transfers.

Circumvention extends beyond maritime operations. Levi highlights that Taiwan has exploited loopholes by increasing imports of Russian naphtha sixfold between 2022 and 1H2025, earning an estimated $334mn from petrochemicals exported to sanctioning countries. Türkiye still imports 86% of its refined products from Russia, he notes, which are then relabelled and re-exported to the European Union (EU).

Olena Lapenko, General Manager at Ukrainian energy company NGO DiXi Group, argues that recent developments mark a turning point. She says: ‘Most analysts now agree that the latest US sanctions targeting [Russia’s] Rosneft and Lukoil, announced on 23 October 2025, mark a tangible blow to Russia’s two largest oil majors.’ Combined with Ukrainian strikes on Russian oil infrastructure that have reduced oil product exports by 500,000 b/d to the lowest level in five years, Lapenko argues that this ‘double hit’ creates unprecedented pressure on the Russian economy. Yet enforcement gaps persist. CREA’s analysis found that 18 shadow vessels used false flags while carrying €736mn worth of Russian oil, with 14 traversing European waters in September 2025.

‘The shadow fleet keeps operating because of its scale, decentralised ownership, tolerance of third-country jurisdictions and fraud,’ says Lapenko.

Indeed, Hobhouse adds that vessels now sail ‘with false flags, fake paperwork or no flag at all’.

• Further reading: ‘Tug of war: Impact of Western sanctions and Russian countermeasures on the energy sector’. How effective have Western sanctions been on Russian oil and gas operations? Steven Farmer, Partner; Aaron Hutman, Partner; and Iris Karaman, Associate; at Pillsbury Winthrop Shaw Pittman LLP, look at the spectrum of initiatives aimed to impact the Russian supply chain and the sector’s revenue over 2022/2023.
• Find more about the European Commission’s new roadmap that paves the way to ‘ensure the EU’s full energy independence from Russia’.