The South China Sea, often a geopolitical hotspot, has become the stage for a lucrative and clandestine trade that undermines U.S. sanctions on Iran’s oil industry. A recent Bloomberg investigation, led by Serene Cheng, unveils a shadowy network of tankers facilitating billions of dollars in Iranian oil exports to China, circumventing international scrutiny.
A Cloak-and-Dagger Operation at Sea
In October, Cheng’s team set out from Singapore on a small supply ship to observe the activities of tankers in this region. Their mission was clear: track vessels engaged in the covert transfer of Iranian oil. After hours at sea, the team identified two tankers performing a ship-to-ship transfer—a practice often used to disguise the origin of the cargo.
One ship, the Titan, notorious for carrying Iranian crude, had no identifiable insurer, owner, or legitimate contact details beyond a P.O. box in the Seychelles. The other, the Wind Win, is a Panama-flagged vessel frequently associated with voyages to China.
These clandestine operations rely on “dark fleets”—aging tankers with no proper insurance or regulatory oversight, often sailing under flags of convenience. Such ships turn off their transponders, disappearing from tracking systems for weeks at a time.
The Financial Lifeline for Tehran
Iran, grappling with crippling U.S. sanctions reimposed in 2018, heavily depends on oil revenue to sustain its economy. With limited buyers willing to risk American penalties, a shadow industry has emerged, enabling Tehran to sell oil to willing buyers like China.
According to Bloomberg’s analysis, over $20 billion worth of Iranian oil moved through this shadow network in the first nine months of 2024 alone. Much of this trade is facilitated by relabeling Iranian crude as Malaysian oil during ship-to-ship transfers, obscuring its origin.
China’s official customs data claims zero imports of Iranian oil since mid-2022. However, the country’s imports of “Malaysian oil” far exceed Malaysia’s production capacity, raising suspicions.
Risks of the Shadow Trade
The growth of this covert industry poses severe risks. Environmental disasters loom large, with frequent oil transfers increasing the chance of spills or explosions. Previous incidents, such as the 2023 explosion aboard the Pablo, highlight the dangers.
Moreover, the presence of these fleets in Southeast Asian waters has strained diplomatic relations. The U.S. has urged Malaysia and neighboring countries to enforce sanctions more rigorously. However, Malaysian authorities, citing limited resources and the area’s vastness, have denied the ability to monitor these transfers effectively.
A Resilient Trade Network
Despite international pressure, the shadow fleet’s operations remain robust. The lucrative profits for operators, coupled with Iran and China’s vested interests, ensure this trade will persist. With a new U.S. president set to take office, questions about future enforcement of sanctions loom.
However, Serene Cheng predicts little change: “This trade is incredibly resilient. The financial incentives for dark fleet operators and middlemen are immense, and demand for oil from countries like China ensures this network’s survival.”
The South China Sea’s shadow industry exemplifies the complexities of global sanctions enforcement. As long as there are profits to be made and buyers willing to ignore U.S. sanctions, the clandestine transfer of Iranian oil is unlikely to vanish.
Source » irannewsupdate