China says it is not importing Iranian crude. Its customs data shows no Iranian barrels since 2022. Yet tankers tell another story. Ship tracking, customs anomalies, and expert reports all point to a massive hidden pipeline of Iranian oil flowing into China under false identities.
From Beijing’s perspective, this is not cheating. China signed a four hundred billion dollar partnership with Iran in 2021. That deal includes long term cooperation on energy, trade, and security. Chinese leaders see that agreement as the real rule. U.S. sanctions are treated as a problem to work around, not a threat to obey.
At sea, this attitude has created a covert system that moves millions of barrels of oil every day through fake labels, front companies, and aging tankers that disappear from radar at convenient moments.
The Numbers That Give the Game Away
The biggest clue is the trade data.
China’s crude imports from Indonesia have exploded this year. In 2024, China bought less than 100,000 metric tons of Indonesian crude. For the year through October 2025, that figure has jumped to 9.81 million tons, equal to about 235,570 barrels per day.
Indonesia’s own numbers make that impossible. Indonesian customs data shows just 1.7 million tons of crude exported between January and September. Only about 25,000 tons of that went to China.
In other words, China is reporting almost six times more crude from Indonesia than Indonesia exported to the entire world. The only way to explain this is that a huge share of that “Indonesian” oil is actually Iranian crude that has been relabeled on paper.
The same pattern showed up earlier with Malaysian crude. China’s customs figures regularly showed far more oil from Malaysia than Malaysia could produce. When banks and compliance departments began rejecting documentation that listed Malaysia as the origin, traders simply shifted the declared source to Indonesia. The barrels did not change. Only the paperwork did.
Routes Through Malaysia and Indonesia
The physical flow of oil still runs through familiar routes in Southeast Asia.
Most Iranian crude destined for China is transferred between tankers in waters off the coast of Malaysia. Analysts at Energy Aspects note that ship to ship transfers in this region remain the main method of moving Iranian oil to Chinese buyers. These transfers often occur with tankers switching off their Automatic Identification System transponders, which makes tracking harder and helps hide the true origin of the cargo.
According to data from Kpler, in the first ten months of the year China imported more than 57 million tons of Iranian origin or suspected Iranian origin crude. Over 51 million tons of that moved via ship to ship transfers.
Once the oil has been shifted from sanctioned Iranian tankers to other ships, it can be sailed into Chinese ports and declared as something else. For years, the preferred label was “Malaysian.” Now, as banks become suspicious of that label, traders increasingly declare the oil as coming from Indonesia. The actual barrels are largely the same. Only the declared origin changes to stay one step ahead of enforcement.
The Shadow Fleet That Makes It Possible
To keep this trade flowing, Iran and China rely on a growing “shadow fleet” of tankers.
Dryad Global reports that this covert fleet includes about 477 tankers. Many of these ships are more than fifteen years old. They frequently show suspicious behavior, such as turning off AIS signals, using flags of convenience, and moving from owner to owner through shell companies.
This dark fleet now accounts for roughly ten percent of global oil tanker capacity. It is used to funnel sanctioned Iranian crude, disguised as Malaysian or Indonesian, into Chinese refineries. Many of the barrels end up at so called teapot refineries in Shandong province and at facilities around ports such as Rizhao Shihua, Daya Bay, and Dongying.
Older ships, operating with weak insurance and falsified paperwork, also increase the risk of spills and accidents. Dryad warns that this structure raises operational and environmental dangers along busy sea lanes such as the South China Sea and the approaches to the Strait of Malacca.
Front Companies, Fake Documents, and Middlemen
Moving this much oil requires more than tankers. It also needs a dense web of intermediaries to charter vessels, hide ownership, arrange transfers, and handle payments.
The Iranian Armed Forces General Staff uses a specialized oil sales arm called Sepehr Energy Jahan Nama Pars Company. This entity sits at the center of a network of front companies and shipping partners.
UAE based Luan Bird Shipping Service has chartered multiple vessels to move Iranian crude, paying commissions for shipments on sanctioned ships such as BOREAS, SIRI, OXIS, BALU, and ROC. Another UAE firm, Mars Investment, has financed charter deals for shadow fleet vessels and helped deliver nearly two million barrels of Iranian oil to Sepehr front companies.
Panama based Loire Shipping owns the sanctioned tanker HEBE, later renamed DAKSHA, which continued carrying Iranian cargoes even after being blacklisted. Greek company Altomare S.A. owns the tanker KALLISTA, which moved nearly four million barrels of Iranian oil in early 2025.
Moon Line Plastics and Raw Materials, another UAE company, has acted as shipper for Iranian military oil cargoes and helped disguise crude as Malaysian heavy oil, a common trick used by Iranian smugglers.
Alsafeenah Althahabya Ship and Boats Spare Parts, also known as Golden Argo Marine Services, provides ship to ship services in the Persian Gulf, a legitimate business that has been twisted into a tool for sanctions evasion. It worked with National Iranian Tanker Company vessels to offload crude onto shadow fleet ships bound for Asia.
India based RN Ship Management has operated multiple vessels, including the sanctioned tanker SOBAR, to move Iranian crude. Its leaders are now designated for supporting the Iranian military’s oil sales.
On the buyer side, Germany based BPT Berlin Petroleum Trading sought to purchase millions of barrels of Iranian crude using a sanctioned tanker near Malaysia. UAE based Shandong Independent Energy Trading made multiple deals with Sepehr front companies to buy over one million barrels of crude valued at nearly seventy million dollars.
Behind the scenes, Iranian and foreign individuals help manage email accounts, ship movements, payments, cryptocurrency flows, banking access, and vessel identity changes. Some of them instruct captains to switch off AIS, alter vessel markings, and falsify shipping documents to hide the presence of sanctioned tankers.
The Oil for Weapons Trade Loop
This oil trade is not just about cheap energy. It is also about weapons.
Dryad Global describes a “China Iran oil for weapons trade loop” built on their 2021 Comprehensive Strategic Partnership. Under this arrangement, Iran sends crude to China, while Chinese firms provide military technology and components in return.
Negotiations in October 2025 reportedly linked oil shipments to the supply of missile and drone parts, including systems related to China’s HQ 9 air defense technology and propellant inputs. This loop allows Iran to fund its military and proxy forces with oil revenue while buying Chinese hardware to make those forces more lethal.
Iranian backed Houthis in the Red Sea and Gulf of Aden have carried out more than 130 attacks on shipping since 2024, often using drones and missiles that rely on advanced components. U.S. Naval Forces Central Command notes that the success rate of these attacks has risen by about 40 percent compared to 2023.
As this oil for weapons loop grows, more money flows to Iran, more Chinese technology flows back, and the risk to global shipping and regional stability rises.
U.S. Sanctions and Their Limits
The United States is not ignoring this situation. Treasury’s Office of Foreign Assets Control has launched an aggressive sanctions campaign in 2024 and 2025.
Since January 2025 alone, Washington has carried out nineteen rounds of sanctions under Executive Orders 13902 and 13846 and related authorities. More than 253 entities and vessels have been targeted. Sanctions have frozen over 500 million dollars in assets.
Recent actions include
• designating front companies that charter shadow tankers for the Iranian military
• blocking owners and operators of key vessels in the shadow fleet
• targeting firms that provide ship to ship services used to hide cargo origins
• sanctioning European and Gulf based buyers that purchase Iranian crude
• expanding measures on Mahan Air and its subsidiary Yazd Airways for moving personnel and weapons for Iranian proxies
These steps are part of a maximum pressure strategy designed to cut off funding for Iran’s nuclear program, military rebuilding, and support to terrorist groups. Officials stress that sanctions are meant to change behavior, and that entities can seek removal if they stop supporting illicit activity.
But the real world impact has limits. Iran’s exports have rebounded to an estimated 1.5 to 2 million barrels per day. Dryad and other analysts estimate that 80 to 90 percent of that now goes to China. Payments often occur in yuan or through barter and non U.S. channels, which weakens American leverage.
By absorbing more than half of Iran’s crude, Beijing has blunted the effect of U.S. sanctions and shown that a determined major power can keep a sanctioned supplier alive if it is willing to defy Washington.
Why China Does Not See This as Cheating
From a Western perspective, China is clearly cheating on sanctions. It is importing huge volumes of Iranian oil through fake labels, front companies, and a dark fleet that hides in the shadows of global shipping.
From Beijing’s perspective, the story is different. Chinese leaders see the 2021 Comprehensive Strategic Partnership with Iran and the four hundred billion dollar framework that came with it as a higher obligation. They view U.S. sanctions as unilateral tools that do not bind China.
In practice, that means China does not consider this covert trade to be cheating. It is simply executing a long term strategic deal with Tehran. As enforcement tightens on “Malaysian” crude, traders just switch to “Indonesian.” As certain tankers are sanctioned, new shell companies buy more old ships and bring them into the shadow fleet. Only the surface details change. The core trade continues.
The China Iran oil connection has evolved into a sanctions resistant ecosystem. It has its own fleet, its own bankers, its own intermediaries, and its own methods of rewriting the origin of every barrel.
Shipowners, charterers, and insurers who touch these flows face serious risk. Dryad warns that shadow cargoes, falsified documents, and complex ownership chains change due diligence requirements and increase exposure to enforcement or accidental involvement in illicit trade.
At the same time, Iran uses the revenue to fund proxy warfare, while China gains access to discounted oil and strategic influence in the Middle East.
As long as Beijing believes its deal with Tehran matters more than U.S. sanctions, China will keep importing Iranian crude under foreign labels. The United States can continue to tighten sanctions, but it is fighting a system that was built to ignore those rules.
ACZ Editor: China needs the oil. They are not like Europe in that they will not make sacrifices to appease the U.S. In our opinion, sanctions on Iranian Oil is not a good strategy to keep Iran in check. We should have gone for regime change when we had the chance, it is the only good solution at this point.