Iran Sanctions and Oil Supply — Maximum Pressure, Chinese Imports, and the Global Price Effect
Iran's oil sector has been under US sanctions since 2018, yet Iranian crude continues to flow — primarily to China — at deep discounts. The 2025 maximum pressure policy aims to change that. The global oil market is watching whether enforcement can actually cut supply, and pricing in the risk premium accordingly.
Iran's oil production and export volumes
Iran holds the world's third-largest proved crude oil reserves (approximately 210 billion barrels) and fourth-largest natural gas reserves. Before the 2018 reimposition of US sanctions under the Trump administration, Iran exported approximately 2.8 million barrels per day — one of the world's top five exporters.
Sanctions cut exports to as low as 400,000–700,000 b/d in 2019–2020. But the enforcement deteriorated during 2021–2024 as Biden-era diplomacy created ambiguity about secondary sanctions enforcement and Chinese refiners became increasingly brazen in importing Iranian crude. By late 2024, Iranian exports had recovered to approximately 1.5–1.8 mb/d — about 60 % of the pre-sanction level.
This recovery put Iran back as a meaningful swing factor in global supply — a complication for OPEC+ that was simultaneously managing its own production restraint agreement. More Iranian barrels flowing freely undercut the discipline of OPEC members holding back supply.
China as buyer of last resort
Virtually all Iranian crude exports in 2024 went to China, primarily to independent "teapot" refineries in Shandong province that are less exposed to US financial system sanctions than major state-owned refiners. Iranian crude was sold at discounts of USD 5–15 per barrel versus Brent, making it economically attractive despite the logistics complexity and legal risk.
| Year | Iran crude exports (mb/d) | China share | Discount to Brent (USD/bbl) |
|---|---|---|---|
| 2018 (pre-sanctions) | ~2.7 | ~25 % | ~2–4 |
| 2020 (peak sanctions) | ~0.5 | ~90 % | ~10–15 |
| 2022 | ~1.0 | ~95 % | ~8–12 |
| 2024 | ~1.6 | ~95 % | ~5–10 |
China's willingness to absorb sanctioned oil — from Iran, Russia, and Venezuela — is a structural feature of the current global market that significantly reduces the effectiveness of Western sanctions as a tool for cutting export revenues. The EIA's Iran country analysis tracks export volumes and infrastructure.
Maximum pressure 2025
The Trump administration's 2025 maximum pressure campaign went further than the 2018–2020 version in several respects. Secondary sanctions were expanded to target specific Chinese teapot refineries by name — designating them as Specially Designated Nationals (SDNs), which cuts them off from any USD-denominated transactions and US correspondent banking relationships.
The practical effect depends on whether Chinese entities fear losing access to the US financial system more than they value cheap Iranian crude. In 2018–2020 the answer was "yes" for large state-owned companies; for smaller teapots with minimal US financial exposure, the calculus is different. The 2025 campaign also expanded sanctions on the tanker fleet used to move Iranian oil — the so-called shadow fleet.
The diplomatic context matters too. US–China trade tensions in 2025 (tariff wars, technology export controls) reduced Chinese incentive to cooperate on Iran sanctions enforcement. Beijing views its ability to purchase Iranian crude as a strategic hedge against potential US energy sanctions against China itself.
The shadow tanker fleet
Iran, Russia, and Venezuela have progressively built up a "shadow fleet" of aging tankers with opaque ownership structures that operate outside Western shipping insurance and financing networks. Estimates put the Iranian-linked shadow fleet at 200–300 tankers by 2025 — enough to move 1.5–2.0 mb/d.
Sanctioning individual shadow fleet vessels is a game of whack-a-mole: new entities are created, flag registries changed, and ownership layered through multiple jurisdictions. The same challenge applies to the Russia shadow fleet that emerged post-2022, covered in tanker freight rates.
The cost of the shadow fleet operation — higher insurance, older vessels, discounted crude — is effectively a tax on Iran's export revenues, not a physical barrier to supply. As long as the discount offered to buyers covers the logistical premium, exports continue.
Effect on global crude and pump prices
The market effect of Iran sanctions depends on how much supply is actually removed. Three scenarios:
| Scenario | Supply removed | Brent effect | Pump price effect (low-tax market) |
|---|---|---|---|
| Enforcement with Chinese compliance | –1.0 to –1.3 mb/d | +USD 6–10/bbl | +4–6 cents/litre |
| Partial enforcement (teapots only) | –0.3 to –0.5 mb/d | +USD 2–4/bbl | +1–2 cents/litre |
| Sanctions largely bypassed | Minimal | <USD 1/bbl | Negligible |
The market's 2025 base case appeared to reflect the "partial enforcement" scenario. Brent traded in a USD 70–82/bbl range through H1 2025 — below the USD 85+ levels that would emerge if Iranian supply was genuinely cut. The OPEC+ spare capacity buffer of ~3–4 mb/d also caps the upside: Saudi Arabia can release supply to offset a supply shock if it chooses.
Use the FuelTheGuide Explorer to see current pump prices in Iran's neighbouring countries and major oil-importing nations.
The deal scenario: what sanctions removal means
Paradoxically, the maximum pressure approach could eventually lead to a new nuclear deal — or it could harden Iranian positions, making a deal less likely. If a deal is struck and sanctions are removed, the market effect runs in the opposite direction: more Iranian supply, lower Brent, lower pump prices globally.
The IEA estimated that full Iranian sanctions removal could add 0.5–1.0 mb/d incrementally within 12 months and up to 1.5 mb/d within 2 years. At current market conditions, that would put downward pressure of USD 3–6/barrel on Brent — equivalent to ~2–4 cents/litre at the pump in a low-tax market. OPEC members would likely offset part of any Iran increase with production restraint, limiting but not eliminating the price relief.
The geopolitical overlay of the Iran situation connects to the broader Middle East fuel price picture explored in Middle East fuel prices and the OPEC dynamics in OPEC production quota system.
Frequently asked questions
How much oil does Iran export despite sanctions?
Approximately 1.5–1.8 mb/d by 2024, primarily to Chinese independent (teapot) refineries at discounts of USD 5–15/bbl versus Brent. This represents roughly 1.5 % of global supply — meaningful for price formation.
What is "maximum pressure" on Iran?
A US policy of enforcing all available sanctions with the goal of reducing Iranian oil exports to zero. It involves secondary sanctions targeting Chinese refineries and tanker operators that purchase Iranian crude, threatening to cut them off from the US financial system.
Could Iran sanctions removal release significant oil supply?
Yes. A full sanctions removal could add 0.5–1.0 mb/d incrementally within 12 months and up to 1.5 mb/d within 2 years — reducing Brent by USD 3–6/barrel. OPEC would likely offset part of any Iran increase with cuts of its own.
How does Iran sanctions enforcement affect global petrol prices?
Stricter enforcement removing ~500,000 b/d would push Brent up USD 3–5/barrel — adding ~2–4 cents/litre at the pump in low-tax markets. High-tax markets see a smaller proportional effect since crude is a smaller share of the pump price.