INSIGHTi

Iran’s Petroleum Exports to China and U.S.
Sanctions
October 23, 2023
Members of Congress have long expressed concern with Iranian petroleum exports. The October 2023
attacks on Israel by Hamas, which Iran supports, have increased congressional concern. Iran’s exports
have risen in 2023, with most of this increase attributed to China. The nature of Iranian petroleum exports
(including the range of evasive techniques used to obscure them) complicates efforts to obtain a complete
picture of the trade and the effectiveness of U.S. sanctions policy.
Background: U.S. Sanctions
U.S. efforts to limit Iranian exports of petroleum and petroleum products (hereafter petroleum) via
sanctions go back decades. Section 1245 of the FY2012 National Defense Authorization Act (P.L. 112-81)
(22 U.S.C. § 8513a) directed the President to block from the U.S. financial system foreign financial
institutions that conduct transactions with Iran’s Central Bank or other designated Iranian banks whose
assets are blocked under the provision, except for foreign central banks that do not engage in transactions
related to Iranian petroleum. The statute excepts from these secondary sanctions foreign financial
institutions in countries determined to be significantly reducing their purchases of Iranian petroleum
(President Trump approved the last such exception in 2018). The President also has waiver authority if he
certifies that there are “exceptional circumstances that prevented the country from being able to reduce
significantly its purchases of petroleum,” but no such waivers have been issued to permit new petroleum
imports, though some were issued to permit transfers of Iranian funds to banks in third countries. Under
Executive Order 13846, issued by President Trump in 2018 to reinstate U.S. sanctions as part of his
decision to cease U.S. participation in the Joint Comprehensive Plan of Action (JCPOA), the Secretary of
State has the additional authority to sanction any person determined to have engaged in a transaction
related to the “purchase, acquisition, sale, transport, or marketing” of Iranian petroleum. The United
States has imposed sanctions on dozens of companies for their role in the illicit shipment of Iranian
petroleum to Asia under E.O. 13846.
Iran’s Petroleum Exports to China
U.S. secondary sanctions are intended to impose financial or other costs to dissuade foreign persons from
participating in sanctionable activities, but sanctions do not in and of themselves prevent those activities.
Congressional Research Service
https://crsreports.congress.gov
IN12267
CRS INSIGHT
Prepared for Members and
Committees of Congress

---

Congressional Research Service
2
With China’s increasing imports of Iranian petroleum, Chinese buyers may have concluded that the
economic benefits of continuing to buy Iranian petroleum exceed the risks of potential U.S. sanctions for
several reasons.
Iranian petroleum is often sold below prevailing market prices: Iran reportedly sells its petroleum at a
discount compared to Persian Gulf or price-capped Russian suppliers to entice foreign traders and buyers.
Moreover, most reported Chinese buyers of Iranian petroleum are small, semi-independent refineries
known as “teapots.” According to one advocacy group, these refineries are “both hard to uncover and not
exposed to the U.S. financial system,” constraining the effect of U.S. sanctions. Iran reportedly exported
1.5 million barrels of petroleum a day to China in August 2023, the highest level recorded by one industry
tracker in more than ten years. Another source estimates that nearly all Iranian petroleum exports go to
China (Figure 1).
Figure 1. Iranian Petroleum Exports

Source: United Against Nuclear Iran, data compiled using multiple sources. Data available here.
Notes: “Rest of World” includes some exports to unknown destinations, which may include exports that eventually
reached China.
In light of reports of increased Iranian petroleum exports, and the resulting accrual of billions in revenue
for the Iranian government in accounts held abroad, some Members of Congress have accused the Biden
Administration of “not enforcing petroleum sanctions.” All sanctions related to Iranian petroleum remain
in place. It has been reported that U.S.-Iran diplomatic engagement in mid-2023 included, along with de-
escalatory steps related to Iran’s nuclear program and other issues, an Iranian expectation that the United
States would not interdict Iranian petroleum at sea. Some observers have speculated that competing
global interests, a desire not to escalate tensions with China, or the pursuit of lower petroleum prices may
also inform the Biden Administration’s Iran sanctions policy in a way that de-prioritizes the enforcement
of sanctions.
Biden Administration officials reject those charges, pointing to the Administration’s designation of
hundreds of entities for sanctions for their involvement in Iran-related activities. The Biden
Administration also seeks forfeiture of nearly a million barrels of Iranian petroleum from the tanker Suez
Rajan, in what the Justice Department called “the first-ever criminal resolution involving a company that
violated sanctions” related to trade in Iranian petroleum.
The Suez Rajan case illustrates the complexities in enforcing U.S. sanctions against shipments of Iranian
petroleum. The Suez Rajan was owned by a U.S.-based entity, which likely helped enable its seizure.

---

Congressional Research Service
3
Without a direct connection to U.S. jurisdiction, the United States may face more limited options. U.S.
efforts in mid-2022 to confiscate the cargo of a tanker carrying Iranian petroleum that had docked in
Greece were blocked by Greek courts. During the Trump Administration, U.S. officials reportedly e-
mailed the captains of tankers carrying Iranian petroleum to offer rewards for them to pilot their vessels to
countries that would impound them for the United States. The law of the sea limits U.S. jurisdiction to
enforce its sanctions laws at sea by interdicting vessels suspected of smuggling.
Congressional Action
Some Members of Congress have called on the Biden Administration to enforce sanctions on Iranian
petroleum exports to China, including by designating additional Chinese entities violating sanctions. It is
unclear what impact, if any, such designations might have on Iran-China petroleum trade, global
petroleum markets generally, U.S.-China relations, or other dynamics. Hamas’s October attack on Israel
has increased attention to the issue. On October 19, the House Foreign Affairs Committee began to mark
up H.R. 3774, which would mandate sanctions on those involved in Iranian-petroleum related
transactions, including refineries, and direct the Administration to submit annual reports on Iranian
petroleum exports. Another bill, H.R. 5923, would impose sanctions on the U.S.-based correspondent
accounts of Chinese banks that conduct transactions involving Iranian petroleum.

Author Information

Clayton Thomas, Coordinator
Jennifer K. Elsea
Specialist in Middle Eastern Affairs
Legislative Attorney


Dianne E. Rennack

Specialist in Foreign Policy Legislation




Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

IN12267 · VERSION 1 · NEW

---