As Western nations consider tightening sanctions in response to attacks against Israel, the global market faces potential upheaval. China, being the primary importer, could be forced to seek alternative sources for the "black gold," which would drive up prices internationally. According to Iran’s own statements, it can now export oil "anywhere."

During the first three months of the year, Tehran sold an average of 1.56 million barrels per day, with the majority of its oil purchased by China. This marks the highest level of Iranian oil exports since the third quarter of 2018, as reported by data from the company Vortexa.

This success in crude oil exports underscores the challenges faced by the USA and the EU in exerting pressure on Tehran following missile and drone attacks against Israel.

“The Iranians have mastered the art of circumventing sanctions,” Fernando Ferreira, the director of geopolitical risk service at Rapidan Energy Group, told the Financial Times. He added, "If the Biden administration truly wants to make an impact, the focus must shift to China."

Sanctions in Question

The US and the EU are preparing new sanctions against the Islamic Republic, partly to deter Israel from escalating its conflict with Tehran through retaliation. Janet Yellen, the US Treasury Secretary, acknowledged this week that Iran is "clearly" continuing its oil exports and "more must be done" to curb them.

However, analysts believe Washington is reluctant to strictly enforce the “maximum pressure” sanctions regime introduced in 2018 by then-President Donald Trump, citing the Biden administration's reluctance to place the global oil market—and hence domestic inflation—under pressure during an election year in the US.

Sanctioning Iran would obligate China to source crude oil from elsewhere, likely driving up prices.

This scenario carries significant domestic political risks for the US, potentially pushing the price of "black gold" above $100 per barrel and crossing the psychological threshold of $4 per gallon for fuel in the US. With the summer vacation season looming and millions of Americans hitting the road, followed by presidential elections in November, fuel prices have become a hot political issue and campaign topic.

In Tehran, the state-run Tasnim news agency reported on Wednesday that the country's oil industry had found ways to bypass sanctions, adding that its primary buyer, China, largely shields it from Western pressure.

Following an attack by Israeli forces that neutralized approximately 300 rockets and drones launched by Iran on a Saturday night, concerns have escalated that the region is sliding towards a broader conflict, while Israel weighs its response. The attack, marking the first time Tehran directly targeted the Jewish state, was purportedly in retaliation for an alleged Israeli strike on its consulate in Damascus, resulting in the death of several high-ranking Iranian commanders.

Tensions escalating since a Hamas attack against Israel on October 7 have contributed to a more than 15% increase in oil prices this year, reaching around $90 per barrel. However, prices have dipped following the Iranian assault as traders anticipate uninterrupted supplies from the region.

Brent crude fell 3% to $87.37 a barrel on Wednesday.

According to Armen Azizian, a senior analyst at Vortexa, the US recently targeted certain tankers suspected of transporting Iranian crude, sanctioning two in February and an additional thirteen in April, though the impact on exports has been "minimal" so far.

Iran has proven adept at finding loopholes. "They've started falsifying AIS data, which doesn't show their actual location, making it hard to track their movements," Azizian added.

Over the past year, the fleet used by Iran to transport oil has grown by a fifth to 253 vessels, and the number of supertankers capable of transporting 2 million barrels of oil has doubled since 2021.

The majority of Iranian oil sold this year has gone to China, suggesting that tightening sanctions against Iran could further strain the already tense Sino-American relations.

Iran boasts that it can export oil "anywhere," with about a tenth of China’s oil imports coming from Iran. However, the oil is processed through smaller, private refineries rather than through state-run oil and gas companies. Iranian Oil Minister Javad Owji reported last month that oil exports generated over $35 billion in revenue last year. He stated that while Iran's enemies sought to halt its exports,

"Today we can export oil anywhere we like, with minimal discounts."

In the last decade, the surge in shale oil production has made the US the world’s largest producer, allowing Washington to enforce more aggressive sanctions against other oil exporters. On Wednesday, for example, the Biden administration reintroduced sanctions against Venezuela, another member of the OPEC cartel.

The Biden administration has shown willingness to release crude from strategic reserves and indicated it might do so again if global prices rise and domestic fuel costs escalate. However, Republicans are increasingly pressuring the White House to act against Iranian oil sales, criticizing the government for becoming lenient with existing sanctions.