The Journal. - How China Keeps Iran's Oil Industry Afloat

Episode Date: April 22, 2026

Get your tickets to our L.A. live show here!In the first Trump administration, the U.S. launched a “maximum pressure” campaign to cut Iranian oil from the global market and eliminate Tehran’s biggest source of revenue. Today, Iran sells billions of dollars’ worth of oil every month via a shadow fleet of ships that have been passing through the Strait of Hormuz. WSJ’s Rory Jones takes us inside Iran’s underground network for shipping, processing and selling oil in China. Ryan Knutson hosts. Further Listening: - How Iran's Regime Changed... for the Worse - The Strait of Hormuz Showdown - In Iran, an Uneasy Calm Amid a Cease-Fire Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Iran's oil industry has been under harsh sanctions for nearly a decade, and the U.S. imposes penalties on any countries that buy it. And yet, Iran has found a way to keep selling its oil, primarily through a massive underground network. The so-called shadow fleet of ships. Tankers designed specifically to evade monitoring and sanctions. All for Iran, this network has become a critical tool to keep its oil revenues flowing, despite After the US and Israel attacked Iran, Iran closed the Strait of Hormuz, preventing other Middle Eastern countries from exporting their oil.

But Iran has continued allowing this ghost fleet safe passage. How important is this for the Iranian regime in its survival? I don't think that Iran could have fought this war necessarily without the billions and billions of dollars. received, equivalent of dollars is received from these oil sales over the years. So this is a significant chunk of cash for Iran annually, and it's a vital lifeline for the country. That is, until last week. After peace talks collapsed, Trump announced a naval blockade on Iran's Gulf ports in an attempt to shut down its ghost fleet. Our colleague Rory Jones covers how money flows around the world and how the blockade is impacting this underground network.

Iran and countries like Russia and Venezuela that have been sanctioned, they've used this shadow fleet of tankers to move sanctioned oil around the world. What the U.S. blockade has demonstrated is that quite easily you can use force to disrupt that entire operation and the threat of force even because you don't necessarily even have to intercept ships to do that. You just have to create a sense of fear that the US will. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Wednesday, April 22nd.

Coming up on the show, the Ghost Fleet, that's funding Iran's war efforts. This episode is brought to you by Volkswagen. Need a vehicle that isn't afraid to make a splash? That's the Volkswagen Tows. Capable and confident. It's fit for everyday life. Nimble in traffic, agile and tight spots, and still spacious enough for weekend getaways.

While available, 4-Motion All-W drive gives confidence in rain and snow. The capable Touse. You deserve more confidence. Visit vw.ca to learn more. SUVW, German engineered for all. There's more to life than finding the perfect car. But finding the perfect car can help you get the most out of life. Like the SUV that handles everything from drop off to off road

and the car that hulls groceries and hockey teams or the van that's gone from just practical to practically family. Whatever you want, wherever you're going, start your search at ototrater.ca. Canada's car marketplace. During President Trump's first term in office, he pulled out of the nuclear deal the Obama administration had struck with Iran and imposed what he called a maximum pressure campaign

in hopes of getting Iran to give up on its nuclear ambitions. Here's then Secretary of State Mike Pompeo. We have an obligation to put maximum pressure on the regime's ability to generate and move money, and we will do so. And what it aims to do is reduce Iranian oil exports to zero. So we want to cut that financial lifeline, which makes up a huge chunk of Iran's annual budget. The U.S. threatened to hit any buyers of Iran's oil with sanctions,

effectively drying up the country's customer base. So you had countries in Europe and in Asia buying, US allies buying Iranian oil before that, but they all then left the room, and only really one significant buyer emerged, and that was China. Now, China buys 80 to 90% of Iran's oil. One reason is there isn't much competition for it, making it much cheaper.

Another reason is because China doesn't exactly agree with the U.S. sanctions policy. China's position on U.S. sanctions is that they don't support them and they think that they're a unilateral move by the U.S. and that's U.S. policy, and that they don't have to enforce U.S. sanctions. To China, it's also geopolitical. China has a far deeper relationship with Iran than just buying its oil. Because Iran has been under U.S. sanctions for a very long time, it's had to create out these alternative trade networks with countries that are friendlier towards it.

And China's one of them. And so it buys a lot of goods from China. China builds a lot of infrastructure in Iran. So there's a deep trade relationship there. And China saw the opportunity. not only to get cheap oil, but to help a friend and at the same time undermine U.S. interests. China's official position is that it doesn't import Iranian oil. China's customs authorities haven't reported any crude imports from Iran from 2023 onward.

Instead, China seems to be working with Iran to disguise its purchases. They don't out of least say we are importing Iranian oil in opposition to U.S. policy. And so what the obfuscation and disguising of the Iranian oil does it is it gives China the plausible deniability, the ability to say, in it were important Malaysian oil or Omaneat oil. Walk me through how Iran gets its oil to China through this ghost fleet. How does this ghost fleet operate? The ghost fleet, Iran pumps out crude oil, and that oil is then loaded onto ships. One particular Iranian ship that might be part of the ghost fleet of tankers, it would get loaded with Iranian crude and move from the Persian Gulf where it's picked up Iranian crude, and then it might go to the Gulf of Oman to the middle of the sea,

and at that point it might turn off a tracking system that it's supposed to have on the tanker that reports its whereabouts. And at that point, maybe you might see another ship, It's titled up to the first ship, and you'll see the crude move between the different ships, and that's called a ship-to-ship transfer. And so that second ship might trundle along all the way to Asia, and it gets to in and around Malaysia and Singapore, and then another ship-to-ship transfer might happen,

and a smaller ship would then move that crude oil to a Chinese port, where it would be refined. It's all about trying to obfuscate where this crew has come from. It sounds pretty sneaky. Yeah, it's clever as well as sneaky, I'd say. It's estimated that there are more than 500 ships that make up the shadow fleet that serves Iran,

according to one analyst group. And Iran isn't the only country that uses the shadow fleet to avoid sanctions. Russia, Venezuela, and other countries also have their own versions of the same system. Together, analysts estimate that there is a global shadow fleet of more than a thousand, mostly aging ships that all use the same techniques to hide their movements,

like turning off location transponders and frequently changing a vessel's name and flag. Who owns the shadow fleet? It's certainly not just one company or one country. No, that's absolutely right, yeah. It's difficult to track, in essence, because a lot of the ownership structures of these tankers are opaque.

There are reports by U.S. Think tanks that there's a Chinese-connected company that owns a fleet of tankers, and so the individuals and companies benefiting from the fleet is often difficult to trace. Underpinning

this fleet is a complex system of front companies. So, Iranian shell companies that are leasing these ships, they might create fake invoices showing that the oil comes from somewhere else like Malaysia or man. And so what you have is this complicated dance where these tankers are involved in moving the oil. And at the same time, there's a bunch of shell companies and middlemen that are all trying to disguise where this oil's

coming from. Is it a well-oiled machine, this shadow fleet? Or are there often hiccups in this process? Well, I think based on how much Iran's been able to sell, you'd argue it is a pretty well-oiled machine. But we have seen that there have been occasional hiccups. The US actually indicted some individuals and companies involved in moving sanctioned Iranian oil. And you can see in those indictments it's not always a smooth ride for these tankers. Getting oil out of Iran and onto these shadow tankers is only part of the process, though. There are still several steps before Iran can turn that oil into money. How they do that is next.

Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my out of office has a forever. An IG Private Wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivatewealth.com.

This episode is brought to you by Nespresso. Hear that? That's your next obsession. Every coffee, a new world. Every sip, a new taste. This is the new espresso. One touch, endless possibilities. Iceed, flavored, long, short.

because some days call for that espresso kick, and sometimes a smooth silky latte just wins. It's exceptional but effortless, like actually effortless. Simply press, brew, and explore. Nispresso, what else? Keep exploring at nespresso.com. When Iran's oil gets to China, China's major oil companies don't want to deal with it.

Those companies have international operations and are wary of running afoul of U.S. sanctions. So, like the shadow fleet of ships, There's also something of a shadow network of Chinese oil refineries called teapots. So the teapots are a set of refineries that are largely based in one province in north-eastern China called chondong. And are they called teapots because they are short and stout? And when they get all steamed up, you can hear them shout. Yeah, you could hear them shout, yeah.

I mean, I'm not 100% sure myself. The answer, in fact, is because they're smaller and shorter than a traditional refinery. And in recent years, those teapots have ramped up how much oil they process. The amount of oil that teapots could take in was determined by government quotas. And so what happened over time, as you saw, the government increased the quotas for these teapots to import Iranian oil. And what that meant is that more oil moved from... from the state-owned giants, who essentially exited the market

along with Western countries and Asian nations that were buying Iranian oil, and these private teapot refineries took over, essentially. After it goes to the teapots and gets refined, where does it go from there?

Just into the broader Chinese market? The oil could go into the broader Chinese market. Some of these teapot refineries are part of other conglomerates or have relationships with other businesses in China so that the crude then gets refined and then moves into some other version of petrochemicals

or moves into plastics or it shifts along that chain there. Finally, there's the money. And like with the fleet and the refineries, there's also a shadow banking system too. There's these small Chinese banks that are more willing to open accounts for Iranian shell companies and front companies to receive oil proceeds

that then can move on to other parts of the world. And those smaller banks are more willing to set up those accounts and risk facilitating Iranian money flows because they aren't really connected in the same way as bigger Chinese banks to the international financial system. In some cases, proceeds from the oil sales are sent directly to Chinese construction companies who take the money as payment for building infrastructure in Iran. So there's this barter system that means that money never even has to touch the international financial system and be overseen by the U.S.

One of the other things it could do is it gets paid for the oil in a bank account in China, and then it could use that money to procure things in China that Iranian importers need. So it might buy chemicals or dual-use materials that are used to produce weapons, and then they are shipped from China to Iran. The US estimates that Iran makes tens of billions of dollars per year from selling its oil to China.

This is why the US started imposing that blockade, targeting Iran's shadow fleet. The idea is to throw a wrench in the whole system. That was what happened initially, and then the US has gone even further and said that it is willing to block any Iranian exports anywhere in the world on any kind of ship. And so that's really like stepped up the enforcement. A US naval destroyer firing on an Iranian cargo ship Sunday, blowing a hole in its engine room, President Trump said. And all of that is designed to put economic pressure on Iran. and to force it into a deal, a deal to end the war, to negotiate every its nuclear program

and other ways in which the US wants to curtail Iran. So how effective is this blockade? The blockade, at least for now, is ensuring that Iran can't export oil and therefore it loses access to its financial lifeline. So it's proving to be a, to create economic pressure on Iran. President Trump has extended the ceasefire, but said the blockade would continue. Iran, meanwhile, says it won't negotiate unless the U.S. lifts the blockade. Negotiations between the U.S. and Iran seem to have stalled.

Talks were supposed to resume this week in Pakistan, but neither side sent its delegation. While the U.S. blockade has had an impact on the shadow fleet, it isn't per semit. According to a cargo tracking company, and brokers arranging such cargo, more than two dozen Iranian-linked ships carrying oil and gas have been able to evade it. The whole situation has revealed just how powerful the shadow network is, and how difficult it might be to permanently put an end to. I think that it ties into this broader idea about whether the world moves away from a U.S.-led financial system, in a sense.

China's been creating these alternative payment systems that essentially cut out the US-led financial system entirely and Russia's been doing the same and the setup of the shadow fleet was trying to just avoid any kind of US oversight. And so what you might just see as a result of all of this is that there is this push by these countries, this anti-U.S. block led by countries like China and Russia and Iran to create systems that cut out the U.S. entirely,

cut out the U.S. dollar, and so mean that there's less oversight by Washington of what countries around the world are doing. That's all for today. Wednesday, April 22nd. The Journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Shelby Holiday, Austin Ramsey and Brian Spiegel. Thanks for listening. See you tomorrow.

When a country's productivity cycle is broken, people feel it in their paychecks, their communities, their futures. What does this mean for individuals, communities, and businesses across the country? Join business leaders, policymakers, and influencers for CGs' national series on the Canadian Standard of Living, productivity and innovation. Learn what's driving Canada's productivity decline

and discover actionable solutions to reverse it.