The first item was further proof of Iran’s progress in amassing the fissile fuel used to make nuclear energy and, potentially, nuclear bombs. The second revealed gaping holes in President Trump’s strategy for stopping that advance. Over the summer, the administration made a show of seizing cargo from several other tankers at sea in a bid to deter Iran from trying to sell its oil abroad. Yet Iran’s oil trade, like its nuclear fuel output, is on the rise again.
The Trump administration is entering its final months with a flurry of new sanctions intended to squeeze Iran economically. But by nearly every measure, the efforts appear to be faltering. The tankers that arrived in Venezuela in recent weeks are part of a flotilla of ships that analysts say is now quietly moving a million barrels of discounted Iranian oil and gas a day to eager customers from the Middle East to South America to Asia, including China.
The volume represents a more than tenfold increase since the spring, analysts say, and signals what experts see as a significant weakening of the “maximum pressure” sanctions imposed by the Trump administration since it withdrew from the Iran nuclear deal in 2018.
Other countries, many of them scornful of Trump’s unilateralism on Iran, are showing increasing reluctance to enforce the restrictions, even as Iran embarks on a new expansion of its uranium stockpile, according to industry analysts and intelligence officials, some of whom spoke on the condition of anonymity to discuss sensitive assessments.
As a result, Trump is widely expected to leave President-elect Joe Biden with a crisis that is worse, by nearly every measure, than when he was elected four years ago: an Iranian government that is blowing past limits on its nuclear program, while Washington’s diplomatic and economic leverage steadily declines.
“The Tehran regime has met ‘maximum pressure’ with its own pressure,” said Robert Litwak, senior vice president of the Washington-based Woodrow Wilson International Center for Scholars and the author of “Managing Nuclear Risks,” a book on countering proliferation threats. Far from halting Iran’s nuclear advances, Litwak said, the administration’s policies have “diplomatically isolated the United States, not Iran.”
The weakening of sanctions pressure gives Iran more time to deal with its still formidable economic challenges, without losing a step in its bid to re-create uranium assets it had given up under the terms of the nuclear accord, the intelligence officials and industry experts said. Last week, the International Atomic Energy Agency reported to member states in a confidential document that Iran’s stockpile of low-enriched uranium has swollen to nearly 8,000 pounds, more than 12 times the limit set by the 2015 nuclear deal. Iranian officials justify the breach by noting that it was Washington, not Tehran, that walked away from the agreement.
Even among staunch U.S. allies in Europe and Asia, dismay over the Trump approach has cooled support for the kind of broadly enforced economic boycott that might push Iran to change its behavior, analysts said.
“Many eyes may be averted now” when it comes to Iranian cheating on sanctions, said Eric Lee, an energy strategist with Citigroup in New York. “Many countries are frustrated with U.S. unilateralism, even those with well-placed misgivings about Iran.”
'Just pure barter'
The message conveyed to Iran over the summer was anything but subtle. In a highly unusual move, the U.S. working with unnamed foreign partners seized the cargo of four tankers said to be carrying Iranian oil, including the 600-foot-long Bella, a Greek-owned vessel flying a Liberian flag.
Both Iran and the intended recipient, Venezuela, are under U.S. economic sanctions, and the decision to confiscate and sell the oil was intended to discourage governments and shipping companies from doing business with either of the two. “The United States remains committed to our maximum pressure campaigns against the Iranian and [the Venezuelan] Maduro regimes,” said State Department spokeswoman Morgan Ortagus.
Yet any pause in commerce between the countries was temporary at best. Venezuela and Iran are longtime trading partners — Venezuela, itself an oil producer, relies on Iran for refined petroleum products such as gasoline — and the two quickly found other tanker companies willing to risk the journey. Among the four tankers spotted traveling to, or returning from, Venezuela in recent weeks was the Iranian-flagged Horse, a massive ship the length of a Nimitz-class aircraft carrier, according to TankerTrackers.com, a private company that monitors oil shipments around the world.
The Horse dropped off 2 million barrels of Iranian gas condensate — a straw-colored liquid used as a dilutant for Venezuela’s sludgy crude oil — and picked up 2 million barrels of Venezuelan petroleum to sell abroad, said TankerTrackers co-founder Sam Madani. The ship rounded the Horn of Africa early this past week on its return trip to Iran.
“This is just pure barter,” Madani said of Iran’s trade with the embattled Venezuelans. “They need to get rid of this stuff. They send it to Venezuela, which is perfect, because it improves their oil production. And in return, they get Venezuela’s oil and they can sell it to China.”
Yet, despite its prominence, the tanker traffic between Iran and Venezuela is but one facet of an illicit trade that has grown in size and sophistication over the past year. Obtaining reliable figures for Iran’s oil industry is difficult, but multiple independent analysts calculated that Tehran exported on average 1.2 million barrels of oil a day in September, and nearly as much in October. That’s less than half the amount of petroleum Tehran was selling in 2018, but it is dramatically higher than the 70,000 barrels reported in April, when Iran was contending simultaneously with Trump administration sanctions and the devastating coronavirus pandemic.
Some of Iran’s partners no longer try to keep the transactions secret. Since the summer, Iran has become increasingly open about its trade with China, which now publicly reports a portion of its Iranian oil imports, defying a Trump administration threat to retaliate against governments that allow commerce with Tehran.
But Iran conceals the bulk of its oil trade through subterfuge, with practices ranging from the simple — changing the names and registrations of oil tankers — to the complex and dangerous, such as clandestine transfers of crude oil or liquefied petroleum gas between vessels in the open sea.
United Against Nuclear Iran, a Washington advocacy group that monitors Iran’s illicit oil trade, obtained aerial photographs depicting four vessels allegedly engaged in illegal ship-to-ship transfers of Iranian oil in October. In five other instances, foreign ships were seen picking up Iranian liquid petroleum gas and transferring the fuel to other vessels bound for Chinese ports. The photographs are part of a report due to be published by UANI this week.
The tankers involved in the exchanges typically turn off their transponders, the automated radio beacons used by ships to identify one another at sea. Some engage in “spoofing,” a kind of seaborne shell game in which ships swap their transponders to make it harder for outsiders to tell where the oil is going. In other cases, a tanker’s owners simply change the vessel’s name or re-register the ship under a different country’s flag.
“It’s a very murky world,” said Daniel Roth, UANI research director, who co-wrote the report with Claire Jungman, UANI chief of staff. “There’s a lot of flag-hopping that goes on. Owners change names and registries at the drop of a hat.”
All sea lanes lead to China
A substantial share of the black-market oil eventually ends up at refineries in China, often after passing though middlemen in Malaysia and other East Asian countries, analysts say. Much of the rest finds its way to foreign markets through a variety of time-tested routes: hauled overland through Turkey; transferred to Iraq to be relabeled and sold as Iraqi oil; or exchanged for cash or in barter-style swaps with other pariah states, such as Venezuela and Syria.
Yet while Iran is succeeding in getting more of its oil to foreign markets, Iranian leaders also expressed hope last week that the Biden administration would return to the 2015 nuclear deal. The accord ended many sanctions against Iran in return for strict limits on its weapons program.
Under the agreement, Western countries lifted curbs on Iran’s oil exports, while Tehran dismantled its Arak nuclear reactor and agreed to limit its stockpile of low-enriched uranium to less than 300 kilograms, or 660 pounds, far short of what it would need to build a single nuclear weapon. With its current 8,000-pound stockpile, Tehran could now build a bomb in less than four months if it decides to do so, weapons experts say. Iran denies having any interest in acquiring a nuclear weapon.
But the prospects for restoring the agreement are far from clear. As a candidate, Biden pledged to reenter the agreement and conduct “hard-nosed diplomacy” aimed at extending the pact and strengthening its provisions. So far, Tehran has shown no signs of willingness to accept such terms, and in any case, it would be unlikely to do so until after next year’s presidential elections in Iran, analysts say.
If negotiations eventually resume, the “timing most likely will be a lot slower than people think, and the volume of oil exports will remain low,” said Lee, the Citigroup energy strategist.
“And even then,” he said, “it still might not work out.”
Correction: This story has been updated to note that Iranian oil was seized by the U.S. in conjunction with unnamed foreign partners not the U.S. Navy. It has also been updated to clarify President-elect Biden’s campaign statement on Iran.