Iran’s Covert Oil Trade: Fueling Terrorism and Defying Sanctions
The Iranian regime has found innovative ways to bypass US sanctions and continue funding its controversial activities. Despite economic challenges, Tehran maintains its support for various groups in the Middle East through a complex system of illegal oil sales.
Iran’s economy took a hit when the US reinstated sanctions in 2018 under Donald Trump’s administration. These measures severely impacted the country’s oil exports, forcing the regime to adopt unpopular policies like tax hikes to cope with the situation.
Nevertheless, Tehran continues to sponsor groups in the Middle East. This ongoing support raises questions about the source of funds for these endeavors.
A recent investigation by The Economist sheds light on Iran’s methods of channeling billions from illicit oil sales. The investigation reveals that Iran uses these funds for its nuclear program and to support various groups.
These include Hezbollah, Hamas, Houthis, and Iraqi militias. The country also produces drones sold to Russia for use in Ukraine.
Despite its struggling economy, Iran generated between $35 billion and $50 billion from oil trade in 2023. Petrochemical exports brought in an additional $15 billion to $20 billion.
Iran’s Secretive Financial Networks and Oil Trade
The Economist’s sources, including former sanctions officials and intelligence members, uncovered Iran’s parallel financial channels. These networks stretch from oil platforms to secret virtual vaults in the central bank.
They effectively hide transactions with oil-buying countries like China. According to the investigation, major global banks and financial centers unknowingly participate in this system.
In July 2023, Iran reportedly held about $53 billion, €17 billion, and smaller amounts in other currencies abroad. US sanctions aim to curb terrorism financing and Iran’s nuclear program development.
These measures prevent American companies from dealing with Iran and discourage foreign businesses with US ties from partnering with the regime.
To circumvent these restrictions, Iran has devised its own oil sales system. This involves various sectors within the regime and external groups. The state-owned National Iranian Oil Company (NIOC) holds the production monopoly in the country.
NIOC’s Swiss subsidiary, Naftiran Intertrade Company (NICO), handles overseas oil marketing. Additionally, some government ministries, religious groups, and even pension funds are responsible for selling the commodity.
A former US official familiar with the matter described the system as “almost medieval.” He likened it to people receiving “pieces of the kingdom.” The investigation found that Iran’s Armed Forces sold $4.9 billion in crude oil last year alone.
Iran’s Oil Trade Evasion Tactics
The Islamic Revolutionary Guard Corps (IRGC) also receives a significant amount of oil for trading, often without official documentation. A former Iranian official stated that the IRGC’s Quds Force, which operates in other countries, received $12 billion from irregular oil trade in 2022.
The US government reports that Iran uses shell companies to evade Western sanctions. These firms outsource sales abroad, like the Turkish company ASB, according to the US Department of Justice.
Estimates suggest over a hundred companies operate illegally in this secret market. Many contracts made by Iranian oil mediators either omit the origin or falsely declare it as produced in Iraq, Malaysia, or Oman.
The true source is often confirmed in a confidential letter accessible to few. The transportation of oil involves a lengthy illicit process. Ships flying flags of other countries, like Panama, collect oil from Iranian export terminals.
They then use communication devices or software to disguise their location until reaching Iraq or Oman. There, the cargo transfers to another ship.
A final transfer occurs in Malaysia or Singapore before the shipment heads to China, Iran’s primary oil customer. Through this complex process, Tehran maintains funding for its operations in the Middle East.
This intricate system allows the Iranian regime to generate illicit revenue and evade long-standing American sanctions against the country.
It demonstrates the challenges in enforcing international sanctions and the lengths to which some nations will go to circumvent them.
Key Facts
— Deep Dive
— For the complete picture, read our in-depth guide: Iran War and Hormuz Crisis 2026: Oil, Latin America and the Global Fallout
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief