Before the imposition of strict U.S. sanctions in May 2011, Iran exported approximately three million barrels of oil daily. With the onset of the Obama administration’s sanctions, this figure dropped below one million barrels by February 2012. Following the implementation of the nuclear agreement in 2015, Iran’s oil exports rose to around three million barrels per day, but after Trump withdrew from the JCPOA, exports plummeted sharply, reaching only 190,000 barrels in winter 2019.
When Biden took office in 2020, Iran’s oil exports increased again, surpassing two million barrels per day by summer 2023. Concurrently, Biden’s policies to reduce sanction pressures helped Iran.
Floating Storage and Oil Maintenance Costs
The Iranian regime needs to extract oil continuously without having suitable technology. Iran’s competitors, like Saudi Arabia, can shut down oil wells without issue, but due to deteriorating wells and lack of investment, Iran is forced to keep extracting. When produced oil remains unsold, the regime uses oil tankers as storage. The cost for these floating storage facilities reaches $15,000 to $20,000 daily.
Extensive Discounts on Oil Sales
During the presidency of Ebrahim Raisi, which coincided with the Biden administration in the U.S., oil exports increased but were accompanied by significant discounts. Majid Ansari announced that Iran offers discounts of $15 to $30 per barrel. These discounts are given to intermediary companies trusted by the Iranian regime, averaging $20 per barrel.
Iran’s Five-Step Oil Sales Process
- $20 to $30 Discount: Brokers, primarily securing buyers for Iran in China, offer a $20 to $30 discount to them.
- Illegal Oil Transfer: At sea, far from ports, oil is transferred from one tanker to another, using software techniques to obscure its origin. The transfer and documentation cost is $5 to $7 per barrel.
- Shipping to Ports in East Asia and Suez: The oil network sends shipments to ports such as Malaysia or the Suez Canal, costing $10 per barrel.
- At this point, about $35 to $45 has been deducted from an $80-per-barrel price. For Iran to use these funds, the regime must produce documentation and launder the money by converting it into other currencies. To achieve this, Tehran relies on a network of exchange offices linked to a vast network of dual-national Iranians across the globe. According to an Economist report, at least 200 dual-national Iranians work for this network in Europe. These exchange offices charge high conversion rates. According to Iran International sources, of the remaining $30 to $40, around $10 to $15 is deducted by brokers and the money-laundering network. What reaches the Iranian regime is less than half of the oil’s actual value, with more than half divided among buyers as discounts, brokers as handling fees, and currency conversion rates.
- Barter with Goods: In some cases, oil is not directly converted into currency; instead, goods from China are imported into Iran in exchange for oil.
In June 2023, former Iranian Foreign Minister Mohammad Javad Zarif said, “Biden’s policy was to ease up on oil sales.” Zarif’s statement confirms that Iran’s oil exports dropped to under 200,000 barrels during the Trump administration and increased roughly tenfold under Biden. These companies also overstate the value of goods imported into Iran in exchange for oil through inflated invoices. The Iranian regime, to access oil sale funds, is forced to accept these transactions.
One Barrel Out of Every Three Belongs to the Armed Forces
According to Iran’s 2024 budget law, the country’s armed forces own one-third of the nation’s oil production. In the 2024 budget, 6.215 billion euros were allocated to the armed forces, compared to three billion euros in 2023. Thus, 33% of the country’s total oil revenue for 2024 will be allocated to the armed forces.
Leaked Documents on Oil Discounts
Leaked documents from “Thunder Desert,” a company affiliated with Iran’s Ministry of Defense, reveal oil transaction discounts of up to $25 per barrel. These discounts were offered to front companies in the UAE. For example, in a $114 million deal, approximately $2.7 million in discounts were provided. In a letter dated March 7, 2023, larger oil purchases received further incremental discounts in five stages, averaging $16 per barrel.
Sanction Evasion Costs and Brokers’ Share
According to statistics, the cost of circumventing sanctions and providing discounts averages around $40 per barrel. The Iranian regime’s parliament estimated that in 2024, Iran will sell 1.055 million barrels of oil per day at an average price of $70 per barrel. This means that in 2024, roughly half of the oil revenue, approximately $13.5 billion, will go to brokers and companies affiliated with the Iranian regime.
