- China and Iran have devised a complex system of ship-to-ship transfers in the South China Sea to bypass US sanctions on Iranian oil.
- This clandestine trade network allows China to continue importing significant amounts of Iranian oil despite official restrictions.
- The effectiveness of US sanctions on Iran is being challenged by the resilience of this illicit trade route.
A recent report in Bloomberg has collected and analyzed five years of satellite images monitoring the South China Sea off Malaysia to detail something which should come as no surprise: Iran and China’s sanction-busting activity regarding Iranian oil exports has been going strong.
The working assumption of the report is that it is Washington’s responsibility – and that of its global allies – to better monitor and enforce sanctions. Bloomberg is essentially calling on the American Empire to better enforce its stranglehold on the Islamic Republic. But this is precisely what President-elect Donald Trump is vowing to do when he enters the Oval Office in January.
Trump’s pledged ‘maximum pressure’ campaign on Iran is likely to have huge repercussions for Beijing as well, given as the world’s biggest buyer of oil China would face a squeeze on its flow of cheap Iranian crude to its shores. Iranian crude has been estimated to make up about 13% of its supply imports.
Trump’s national security advisor pick, Mike Walz, has pledged to stop or greatly reduce Iran’s petroleum revenue, which the US says will have positive benefits for the Ukraine and Gaza wars from a US policy perspective.
He said the incoming administration will strongly engage China toward reducing its purchases of Iranian oil. But the aforementioned Bloomberg investigation shows that business is booming.
“Forty miles east of the Malaysian peninsula sits the world’s largest gathering point for dark fleet tankers. Aging ships, often operating under flags of convenience and without insurance, come here daily to transfer cargo away from prying eyes. It’s how billions of dollars of sanctioned Iranian oil finds its way to China annually — even though the country, officially, hasn’t imported a drop in more than two years,” the report begins.
“A Bloomberg analysis of nearly five years of satellite images from the hotspot shows the vast size of the shadow industry that’s developed as the US has tightened its sanctions on Iran,” the report continues.
“It’s impossible to gauge precisely how much oil is moving via this channel. But even making conservative assumptions about tanker size, the data suggest some 350 million barrels of oil changed hands in this hotspot in the first nine months of this year,” Bloomberg speculates.
“Taking into account the average oil price for 2024 and the discount applied to sanctioned crude, that amounts to more than $20 billion. The true value is likely far higher.”
One approach the Trump administration could take is to go after those Chinese companies involved in the ‘illicit’ trade through secondary sanctions:
For Tehran, in need of revenue and desperately short of willing buyers, the South China Sea gambit is a means of survival. For China, which isn’t bound by and doesn’t recognize US-imposed curbs on Iran, the gymnastics of this network of intermediaries and shell company-owned vessels offers a way for its small refineries to access cheap oil. It also conveniently shields key Chinese corporations from secondary sanctions. (The US can restrict or exclude entirely access to its financial system for any company or person found trading with Iran.)
The government of Malaysia appears to have been looking the other way as well:
The maritime hub is a direct threat to Western efforts to curb revenue going to Tehran, Moscow and Caracas and an illustration of why sanctions are so hard to enforce. US President-elect Donald Trump has said he plans to increase pressure on Iran upon returning to office, but these extensive networks that move dark oil around the globe typically operate without the overt involvement of large entities. The situation was a source of frustration even for the current US administration, which called on Malaysia to do more to tackle gaps such as this one, with little success.
As for these failed “Western efforts” at enforcement, Washington, London, Brussels, and Paris might just have to face up to the reality that they cannot control all trade that happens in the world. When they go ‘imperial’ against the Global South, these countries will push back harder, only finding better avenues and ways to navigate, thwart, and circumvent sanctions.
By Zerohedge
The post The Secretive Oil Shipping Hub Funneling Iranian Crude to China appeared first on Energy News Beat.
Energy News Beat