Iranian crude reportedly moved through Malaysian waters before reaching China, highlighting the Indo-Pacific dimension of Tehran’s oil trade.
During the one-month truce, when the United States lifted its blockade on Iranian oil exports and allowed Iranian shipping to resume, Tehran exported an estimated $6 billion worth of crude oil to China. The oil was transported to waters off the coast of Malaysia in the South China Sea, where it was transferred between tankers before continuing to China, giving the conflict an unexpected Indo-Pacific dimension, according to media reports.
Just 10 days after the blockade was lifted, 20 oil tankers began arriving off Malaysia’s east coast in late June carrying nearly 70 million barrels of crude, according to a Wall Street Journal report published on Saturday, July 18.
The U.S. lifted its oil blockade in the Persian Gulf and the Strait of Hormuz after Iran signed a memorandum of understanding providing for a 60-day truce on June 17. Soon afterward, Iranian tankers began departing Chabahar Port on Iran’s southeastern coast and gathering off Malaysia beginning in late June.
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The oil was transferred ship-to-ship using large hoses at the Eastern Outer Port Limits (EOPL) off Malaysia before continuing to China, per the WSJ report. The EOPL lies outside Malaysia’s territorial waters, about 70 kilometers off the coast of Johor in the South China Sea, near the eastern entrance to the Singapore Strait.
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The WSJ cited shipping data compiled by United Against Nuclear Iran (UANI), a U.S.-based nonprofit organization that monitors Iranian oil exports, sanctions evasion, and the activities of Iran’s so-called shadow fleet. The shadow fleet consists of vessels that frequently evade international oversight by disabling their Automatic Identification System (AIS) transponders.
UANI said in a report released Friday (July 17) that it tracked 66 tankers departing the Gulf of Oman carrying Iranian oil and petrochemicals since the MOU was announced on June 14.
“These exports represent approximately 80 million barrels of Iranian oil, generating an estimated revenue of over $6 billion for the IRGC, which continues to fund Iran’s missile and drone programs,” UANI said, adding that its figures are estimates and the pricing and volumes of Chinese purchases of Iranian crude are not publicly disclosed.
Such cargoes are “widely assessed” to be sold to China at a discount of $10–12 per barrel, according to the report. China purchases roughly 90 percent of Iran’s oil exports.
Lack of compliance with reinstated blockade
Less than a month after lifting the restrictions, the Trump administration reinstated the blockade on July 14, after Iran resumed attacks on commercial vessels transiting the Strait of Hormuz on July 7, renewing tensions in the Persian Gulf.
According to a UANI report, however, commercial shipping through the Strait of Hormuz did not come to a complete halt. While traffic through the southern shipping corridor declined sharply, Iranian- and Chinese-linked vessels continued using the northern routes.
“On July 17, at least 50 tankers listed on UANI’s Ghost Armada were anchored or loitering near the EOPL area with their AIS signals active, demonstrating that ghost fleet tankers continue to operate with impunity across Southeast Asia’s sea lanes,” the report said.
Ghost Armada is UANI’s list of 542 vessels identified since late 2020 that operate separately from Iran’s National Iranian Tanker Company (NITC) fleet but complement its activities. According to UANI, the vessels have transported millions of barrels of Iranian oil by evading U.S. sanctions and exploiting regulatory loopholes.
UANI adviser Charlie Brown had previously accused Malaysia of enabling Iranian shadow fleet operations.
“Because of Malaysia’s inaction, it is facilitating this business model by Iran and China and dark fleet actors,” Brown told the Associated Press in May, about a month after the United States first imposed the blockade in mid-April.
Malaysian denial
Malaysia’s Maritime Enforcement Agency (MMEA) rejected UANI’s allegations in May, saying Iran’s shadow fleet was exploiting “jurisdictional gaps” to conduct ship-to-ship transfers in the Eastern Outer Port Limits, according to the Associated Press.
MMEA Director-General Mohamad Rosli Abdullah said the transfers typically take place in remote waters outside radar coverage, near maritime boundaries or international shipping lanes.
“The selection of such locations is intended to exploit jurisdictional gaps and limit direct enforcement action by local authorities,” he told the news agency.
The MMEA has not issued a new statement following the Wall Street Journal’s latest report.
Meanwhile, Reuters reported that Iran’s first week of public mourning following the death and burial of Supreme Leader Ayatollah Ali Khamenei temporarily slowed crude exports to China. During that period, Chinese buyers reportedly increased purchases from other Middle Eastern suppliers, including Iraq, the United Arab Emirates, and Qatar.
