US sanctions disrupt but fail to halt Iran's oil trade with China - Bloomberg

Successive rounds of US sanctions on tankers and companies involved in Iran's oil trade are slowing shipments to China but trade with one of Iran's most important allies continues in 'dark mode' in spite of maximum pressure, according to Bloomberg.

Sanctions are having an impact on the trade link by increasing costs and logistical hurdles, Bloomberg reported, citing Chinese refinery executives and shipping analysts.

Private Chinese refineries, which are the primary buyers of Iranian crude, have faced supply disruptions in recent weeks due to seller defaults, Bloomberg reported, citing industry sources.

While no specific reason was given, refinery executives attributed the issues to rising expenses and logistical challenges caused by US sanctions.

Washington has blacklisted more than two-thirds of the 150 vessels that transported Iranian crude last year.

The sanctions announced on February 24 followed similar measures by the US Treasury in late 2024, targeting ultra-large crude carriers in Iran's shadow fleet.

More than half of the tankers sanctioned by the United States have ceased operations outside Chinese or Iranian terminals, an investigation by Iran International revealed last month.

The increased restrictions have led to record-high freight costs, with the chartering rate for a non-sanctioned supertanker moving Iranian oil from Malaysia to China reaching up to $6 million—an increase of 50% from last year, Bloomberg reported, citing traders.

Some Chinese port authorities are also taking precautions. Shandong Port Group, which operates in a key refining hub, recently advised against handling blacklisted tankers, Bloomberg's report said.

Despite these obstacles, flows surged to a four-month high last month, partly due to a backlog of delayed cargoes, Bloomberg said.

However, an increasing number of ship-to-ship oil transfers are being conducted in "dark" mode, where vessels switch off their transponders to avoid detection, Bloomberg reported, citing satellite images and analysts.

In the waters off Malaysia, a key hub for Iranian crude shipments, up to seven such transfers were observed in a single day last month. Analysts noted that most of these operations were entirely "dark," indicating that shippers are taking greater precautions as Washington signals increased enforcement efforts.

On Wednesday, Reuters reported that the Trump administration is considering a plan to inspect Iranian oil tankers under an international accord designed to curb the spread of weapons of mass destruction.

Anoop Singh, the global head of shipping research at Oil Brokerage Ltd, told Bloomberg that financial institutions working with private Chinese refiners importing Iranian oil may come under fresh scrutiny. He added that Washington could choose to pressure countries such as India and the United Arab Emirates, where key shipowners and dark fleet operators are based.

He said that so far, the US has focused its sanctions on ships and owners, but the market has managed to create workarounds. “However, there are more critical parts of the network to target, from banks to governments to flag states and insurers — and regulatory avenues to explore,” Singh told Bloomberg.