Iran’s Illicit Oil Exports Surge in August Amid U.S. Failure to Enforce Sanctions

Latest Developments

Illicit Iranian oil exports surpassed 2.2 million barrels per day in August, Bloomberg reported on August 21. This volume exceeds the five-year high Iran reached in May as the United States continues to not enforce existing U.S. sanctions on Iranian oil exports. The growth comes as Reuters reported that $6 billion in frozen Iranian assets in South Korea were transferred to Switzerland’s central bank last week in exchange for the release of five Iranian-American hostages in Iran. It also comes one month after the United States permitted Iraq to release $10 billion to pay off its natural gas import debt to Iran.

Most of Iran’s oil is sold to China, whose leaders believe buying cheap illicit oil from Iran is worth the risk of falling afoul of U.S. sanctions. The Biden administration’s non-enforcement of oil sanctions and release of Iran’s frozen assets provide Tehran the means to further develop its nuclear program and fund the destabilizing activities of its Islamic Revolutionary Guard Corps and proxy militant organizations throughout the region.

Expert Analysis

“When you follow the flow of Iranian oil, you follow the trail of billions of dollars in hidden sanctions relief that the administration is providing to Iran. This isn’t sanctions evasion. It’s sanctions relief.” — Richard Goldberg, FDD Senior Advisor

“Iran is not only exporting increased volumes of oil; it is likely producing more oil as well. Yet despite the increased flow of Iranian oil and the weak economic data from China, the market opened this week with a higher oil price due to maritime insecurity in the Black Sea that is putting upward pressure on global oil price. Washington has set up an oil trade system in which China is the main economic beneficiary, as Beijing buys Russian and Iranian oil at a discount compared to what is paid by the United States, Europe, and their allies.” — Dr. Brenda Shaffer, FDD Senior Advisor for Energy

“The significant increase in Iran’s oil exports and production is the result of the administration’s policy of maximum deference. As Washington’s financial leverage over Tehran erodes, proponents of appeasement argue that conciliating the regime is the only way to avoid war. They use a crisis of their own making to justify a policy that undermines U.S. national interests.” — Saeed Ghasseminejad, FDD Senior Iran and Financial Economics Advisor

Production and Export Increased During Biden Administration

The Trump administration imposed sanctions on Iran after leaving the Joint Comprehensive Plan of Action (JCPOA) in 2018. At the end of 2020, Iran’s oil production fell below 2 million barrels per day — the lowest since the late 1980s — and exports fell to 0.3 million barrels of oil per day. Iran’s oil production and exports began increasing in 2021 as Biden took office and initiated efforts to re-enter the JCPOA. In April, a bipartisan group of senators urged the Biden administration to clear hurdles preventing the Homeland Security Investigations office from seizing tankers carrying illicit Iranian oil.

Related Analysis

“Non-Enforcement of U.S. Oil Sanctions on Iran Hits New High,” FDD Flash Brief

“How Congress Should Respond to an Interim Iran Deal,” by Richard Goldberg and Behnam Ben Taleblu

“U.S. to Provide Iran Access to $16 Billion in Frozen Funds,” FDD Flash Brief