The latest spike in US–Iran tensions has cast fresh light on one of the thorniest issues in Washington's efforts to rein in Tehran: Iran's oil exports to China — a vital economic lifeline — and the mounting difficulties the US faces in halting them.   

Strains escalated last Thursday after the fourth round of US-Iran nuclear talks was abruptly postponed just days before they were set to begin in Rome. On the same day, President Donald Trump issued a stark warning: any country or individual purchasing oil or petrochemicals from Iran would be subject to immediate US sanctions. 

"They will not be allowed to do business with the United States of America in any way, shape, or form," Trump wrote on Truth Social, reaffirming his administration's hard-line stance. 

In the past several months, even before the current talks started, the Trump administration has reinstated the "maximum pressure" campaign aimed at slashing Iran's oil exports to near zero and curbing its nuclear ambitions.

As part of the measures, the US has imposed fresh sanctions on entities accused of facilitating Iranian oil sales, including a China-based crude oil storage terminal and an independent refiner. 

Trump has repeatedly warned of piling on even more pressure if diplomacy fails, adding to the woes of an Iranian oil sector that has already been severely weakened by years of US sanctions. 

Sanctions bite, but Iran's oil still flows 

The sanctions — measures that penalize not only US companies but also third-party countries and companies for doing business with a sanctioned state — remain a uniquely powerful tool for the US, given the size and reach of its economy.

For nations dependent on access to American markets, the choice is stark: stop buying Iranian oil or face economic isolation. 

Yet, Iran appears to be adapting — and even thriving — in the shadows.

Despite US efforts to strangle its oil trade, Tehran is still exporting an estimated 1.2 million to 1.5 million barrels of crude per day, according to commodity analytics firms Kpler and Vortexa.

That marks a sharp recovery from mid-2020, when a combination of sanctions and the COVID-19 pandemic had driven exports to below 400,000 barrels a day.  

Most of Iran's crude is sold at a discount to China, which has emerged as its most consistent buyer despite the threat of US sanctions. Analysts estimate Tehran earns between $30 billion (€26.45 billion) and $40 billion annually from these sales — revenue that supports everything from domestic subsidies to its regional proxy forces. 

Relying on a 'shadow fleet' to ship oil

Iran's continued oil exports rely on a complex web of clandestine operations that make up a vast gray-market industry, say experts. Tankers frequently go dark by switching off their transponders to evade detection.

Oil is often transferred between ships at sea to disguise its origin, and vessels routinely change names, flags, and registries to create confusion. In many cases, documentation is forged to falsely indicate that the oil originated in countries such as Iraq or Malaysia. 

Much of the so-called "shadow fleet" is made up of aging tankers that sail under flags of convenience and lack proper insurance. Many were previously sold for scrap and are no longer covered by international insurers.  

Chinese refiners benefit from steep discounts, while Beijing refuses to recognize US sanctions against Iran. This thriving shadow industry has raised alarms in Washington, where officials warn that enforcement gaps — especially in Southeast Asia — are undermining global sanctions policy. 

'Room for stronger enforcement' of US sanctions

US officials have urged regional partners to tighten their oversight of maritime trade and oil transfers, but political and economic alignments complicate cooperation. Malaysia, for instance, maintains close ties with both Iran and China, and enforcement capacities in the region vary widely.  

Adding to the challenges are technical hurdles in tracking these shipments. The clandestine nature of the operations, combined with a lack of coordinated maritime enforcement, makes it exceedingly difficult to intercept and stop the flow. 

And it's not just Iran. The global shadow tanker network has become a booming multibillion-dollar business. Venezuela and Russia — both under US and international sanctions — have tapped into the same murky system, leveraging tactics like transponder spoofing and ship-to-ship transfers to keep oil flowing to buyers. 

"There's room for stronger enforcement, particularly on the receiving end of these shipments," said Clayton Seigle, a veteran oil market analyst and a senior fellow at the Center for Strategic and International Studies (CSIS) in Washington, DC. 

"That means targeting transport companies and working more closely with local governments — especially in Asia," he told DW. 

US has lost leverage through tariff war

Still, even aggressive enforcement would not be enough to halt Iran's oil trade entirely. According to Seigle, the US now faces a deeper challenge: it has lost leverage over China, the primary destination for Iranian crude. 

He noted that before Trump took office, Chinese buyers appeared more cautious, mindful of the risks tied to potential US sanctions. But that calculus changed after Washington launched a sweeping tariff campaign against Beijing. 

"Once the US imposed those trade tariffs, the impact of financial sanctions diminished," Seigle explained. "From Beijing's perspective, the broader economic costs of the tariff war far outweighed the risks tied to any one set of sanctions. That made the threat of oil-related penalties much less effective."

Edited by: Srinivas Mazumdaru