Recent measures taken by the United States against Venezuela—most notably the imposition of a comprehensive maritime blockade on oil tankers traveling to and from the country and carrying crude subject to U.S. sanctions—have further complicated Iran’s internal landscape. This shift has effectively halted strategic cooperation between Iran and Venezuela in the energy and construction sectors, a partnership that over decades generated billions of dollars for both countries through what are known as “shadow fleets.”

The U.S. actions came amid Washington’s accusations that Venezuela has provided Iran with a permissive operational base. Specifically, U.S. authorities last week seized oil tankers in the Caribbean carrying “sanctioned” crude from Iran and Venezuela. Political analysts view these measures as a turning point in U.S. policy on enforcing sanctions and constraining Tehran’s funding sources at a time when Iran is grappling with an acute domestic crisis, marked by an unprecedented depreciation of its currency and tighter U.S. sanctions. The latest round included penalties on 29 vessels and 20 companies accused of managing Iranian oil exports.

While debates continue behind the scenes at the UN Security Council over the legality of reimposing sanctions last September, the U.S. measures have captured attention amid a surge in Iranian oil exports that has transformed Iran’s economy into a sophisticated, multi-billion-dollar shadow system—one that reached peak capacity following Washington’s withdrawal from the nuclear agreement. According to circulating data (TankerTrackers and UANI), Iran’s oil exports stood at between 1.3 and 1.6 million barrels per day at the end of 2024, compared with 2.15 million barrels per day by the end of 2025.

China: Iran’s Lifeline

China has emerged as Iran’s economic lifeline, absorbing nearly 90% of Iranian crude, primarily through so-called “teapot” refineries in Shandong and Zhejiang provinces. Because these independent refineries are not under Beijing’s direct supervision, the Chinese government uses this as grounds to deny any role in circumventing sanctions. China is the primary beneficiary, purchasing oil at discounts of up to $10 per barrel below Brent prices—costing Tehran an estimated $8–10 billion annually.

The Ghost Fleet

The ghost fleet consists of hundreds of vessels registered to multiple countries—around 70 of them Iranian-owned—many more than 20 years old and technically unfit for operation. These ships manipulate the Automatic Identification System by switching off tracking to conceal their locations. Oil is transferred ship-to-ship and blended with crude from other sources to mask the signature of light Iranian oil. Transfers typically occur in the South China Sea off Malaysia’s coast, before cargoes are delivered to Malaysia and onward to China. Crucially, these vessels fly foreign flags—such as Guyana, the Comoros, and Panama—to avoid immediate blacklisting.

Barter Arrangements

Although most of Iran’s hard currency flows through China, secondary channels facilitate strategic barter trade. This “barter-based economy” accounts for roughly 5–10% of exports and functions as a geopolitical exchange system. Venezuela tops the list, swapping crude for condensates—an Iranian petroleum product—allowing both sanctioned countries to continue domestic fuel production. Russia ranks second, exchanging oil for aviation technology, while Syria’s former regime once ranked third, at roughly 40,000 barrels per day.

The Financial System

Tehran has established a parallel banking system that avoids the U.S. dollar and the euro, relying instead on the Chinese yuan for transactions with China. Revenues are deposited into Iranian accounts at Bank of Kunlun or smaller regional banks that do not deal with the United States. Iran also uses the hawala system—an informal value-transfer network based on credit ledgers that leaves no digital trace for Western regulators. Another mechanism is the “Kish Club,” created to provide protection and compensation in lieu of global insurance, which refuses to cover unlicensed oil tankers.

Overall, combined export channels are estimated at 2.1–2.2 million barrels per day, distributed as follows:

Shadow fleet to China: 1.8–2.05 million barrels per day, mainly to Shandong.

Barter with Russia, Venezuela, and Syria: 100,000–150,000 barrels per year.

Regional smuggling (Iraq, Oman, Pakistan): 40,000–60,000 barrels per day.

Official trade (oil for food): about 10,000 barrels per day.

A System on the Brink?

Exposure of this system is expected to trigger mounting pressure, including sanctions on newly identified actors. The aging shadow fleet itself is also at risk of collapse due to wear and obsolescence. Most critically, the potential return of the “snapback” mechanism—the so-called Snapback Hammer—has made maritime service providers, insurers, and classification societies far more cautious, despite China and Russia pledging to ignore the UN snapback process, which would significantly raise the cost of every Iranian oil export.

In sum, the rebound in Iranian oil exports in 2025 represents a tactical victory for Tehran, which has succeeded in insulating revenues from Western oversight. Yet this success comes at a steep price: Iran has become increasingly dependent on China and its “generosity.” While estimated monthly revenues of around $4.2 billion are sufficient to sustain the security apparatus, they fall far short of addressing a $1 billion infrastructure deficit or curbing inflation running at roughly 50%, which continues to weigh heavily on Iranian citizens.