How the U.S. Can Slash Tehran’s Oil Revenue 

Tehran exported 1.4 million barrels per day of crude oil last month, of which 74 percent went to China. The Biden administration has deliberately relaxed the enforcement of oil sanctions since taking office, a policy whose danger became apparent when Hamas — which is funded, trained, and equipped by Iran — massacred more than 1,400 men, women, and children on October 7. 

“U.S. officials privately acknowledge they’ve gradually relaxed some enforcement of sanctions on Iranian oil sales,” Bloomberg News reported in late August. The purpose of this policy was to encourage Iranian flexibility in nuclear negotiations, yet Tehran has only accelerated its drive toward a nuclear weapons capability. 

Before Biden took office, Iran exported an average of 775,000 barrels per day of oil while the “maximum pressure” policy of the Trump administration was in effect. The average figure under Biden in 2023 is 1.4 mbpd barrels. The total estimated value of Tehran’s oil exports since February 2021 is between $88 billion and $98 billion.  

In September, the Foundation for Defense of Democracies presented a method for estimating how much of Tehran’s estimated oil revenue is due to the relaxed enforcement of sanctions. Using new data from October, that method indicates that Iran earned an additional $32 billion to $35 billion because of lax sanctions enforcement. 

With tens of billions of additional dollars to spend, Iran has found it easier to fund a wide range of initiatives. A source within the Israeli security establishment told Reuters that Tehran’s financial support for Hamas had grown from $100 million to $350 million per year prior to the October 7 massacre. In light of Iran’s decades of support for Hamas, a bipartisan coalition of more than 110 lawmakers, composed equally of Democrats and Republicans, asked the Biden administration to fully enforce sanctions on Iran and restrict its oil revenue.  

If the Biden administration is prepared to reverse course and hold Iran accountable, there are three stages to the plan it should pursue. First, the United States should sever or limit Tehran’s access to its accumulated export revenue. Washington should immediately reverse its decision from earlier this year to let Tehran access $16 billion of its reserves and refreeze them, including $6 billion released to ransom American hostages. The administration should then prevent the potential release of any frozen assets in friendly countries, including Japan, India, and Luxembourg. Additionally, Washington should pressure Beijing to reduce Tehran’s access to funds held in Chinese banks. 

Also as part of the first stage, Washington should develop a sanctions package targeting foreign banks facilitating financial transactions on behalf of the regime in Iran. This should include secondary sanctions — and the potential loss of access to the U.S. dollar and financial system — for those who continue to do business with Tehran. This administration should communicate this plan to Tehran’s key trade partners, including Turkey, Iraq, the United Arab Emirates, and China. 

The second stage is disrupting Iranian’s oil exports through conventional financial and judicial tools. The administration should identify and sanction Chinese purchasers of Iranian oil as well as designate the banks, insurance companies, and other financial institutions that facilitate this trade. The administration should also target the tankers that move Iranian oil as well as the ports, front companies, and front company executives that facilitate the trade. 

The third stage is a confiscation effort that would seize tankers and sell their cargo. The funds could be used to support a campaign of maximum support for the Iranian people, such as creating a strike fund or means of ensuring internet access amid government blackouts. 

In addition to restricting Tehran’s revenue, this three-stage plan would give Washington greater leverage over global oil supplies. It would also force China to rely more for its imports on Persian Gulf states that have a more pro-American orientation. Finally, it would help disrupt the illicit networks that assist other U.S. adversaries, such as Russia and Venezuela, in evading sanctions. 

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). Follow Saeed on X @SGhasseminejad. For more analysis from Saeed and FDD, please subscribe HERE. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.