War on Iran: What is Tehran's 'shadow fleet' really and how does it work?

War on Iran: What is Tehran's 'shadow fleet' really and how does it work?

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Daniel Tester
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Mon, 07/27/2026 - 15:15

US oil sanctions have forced the Islamic Republic to use ageing tanker vessels to sell its most valuable export to China and elsewhere

The tanker Tejas, sanctioned by the US in May 2026 for carrying Iranian oil, docks at Qingdao, China, on 7 April 2026 (AFP)

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Washington has reimposed its naval blockade of Iranian ports after the collapse of a planned peace deal to end the US-Israeli war on Iran. 

For decades, the US has tried to isolate Iran, holder of the world’s third largest proven oil reserves, from the global shipping industry with a range of sanctions.

However, the Islamic Republic has been able to maintain some revenue through a network of rickety tankers often described as its “shadow fleet”, which occupy a legal grey zone and use subterfuge to skirt the US measures.

How do shadow fleets work? 

Shadow tankers, also known as “dark fleets” or “ghost fleets”, are ships that operate on the fringes of the global shipping industry to transport oil and other commodities from countries facing western sanctions. 

Many are ageing vessels that evade detection on marine traffic databases by turning off their mandatory tracking signals or broadcasting false locations. 

Iran is not the only country involved in such operations: Russia, which is also subject to oil sanctions, likewise operates a shadow fleet. Venezuela did so until the US attack on the country earlier this year and the seizure of many of its tankers.

The ships are usually registered in countries with low shipping taxes, lax regulation, opaque registries and few questions asked, thereby obscuring ownership. Such vessels sail under what are known as “flags of convenience” belonging to, among others, Bermuda, Liberia, Panama, Malta and the Marshall Islands.

The ships’ ultimate ownership can often be traced back to Iranian billionaires affiliated with the Islamic Revolutionary Guard Corps. Others are owned by businessmen from China, which is a major customer of Iranian oil. The crews are often drawn from merchant seafarers from Iran, China and South Asia.

Prior to the blockade, analysts estimated that the fleet consisted of about 400 ships, although counts vary. Vessels leave Iran, then unload the oil to another tanker at sea before the cargo reaches its ultimate destination. “Ship-to-ship” transfers, as they are known, are not illegal but can make it harder to trace the origin of cargo. 

Why does Iran have a shadow fleet?

Iran’s shadow fleet has evolved as a response to US sanctions on its most lucrative export.

Only the US, EU and Canada have placed blanket bans on their businesses buying Iranian oil, meaning buyers in other countries can technically import it freely under their own domestic laws, so long as it does not breach other sanctions.

But Washington also imposed far-reaching secondary sanctions on the Iranian energy sector, under which it will sanction and freeze the assets of any organisation worldwide that buys, transports or finances Iranian oil - whether the business is American or not.

The USS Rafael Peralta implements a maritime blockade against the Iran-flagged crude oil tanker vessel off the coast of Iran on 24 April 2026 (AFP/US Navy handout)

These secondary sanctions on Iran were first introduced by US President Bill Clinton in 1996 amid concerns over Iran’s nuclear programme and its backing for regional groups that oppose the US. The sanctions only increased after President Donald Trump axed the Iranian nuclear deal in 2018.

The measures have cut off Iran from much of the international shipping industry, which relies on US banks and dollar transactions and so cannot risk penalties imposed by Washington. Amid such isolation, and the devastating impact it has had on its economy, Tehran has looked at other ways to sell oil.

Who buys shadow fleet oil?

China is the largest buyer of Iranian oil, although it does not officially record such imports, which would attract US sanctions. Instead, it marks the oil as coming from Malaysia and Indonesia, among others.

However, China’s figures often do not match those countries’ export data, which analysts say is a clear sign that the oil is Iranian. 

Why are there sanctions on Iran and when could they be lifted?

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One estimate by analytics firm Kpler put China’s oil imports from Iran at around 1.4m barrels per day in 2025 - 12 percent of China’s overall crude intake. It is purchased at a discounted price compared to global oil prices, with payments taken in Chinese renminbi through Chinese banks. 

The buyers are mostly small, compact privately-owned refineries in China’s northeastern Shandong province known as “teapot refineries”. China’s larger, state-owned refineries generally stay away from Iranian oil, insulating them from US sanctions.

Laleh Khalili, a Professor of Gulf Studies at the University of Exeter, who has written extensively on the global oil shipping industry, told Middle East Eye: “China has enough economic power to not have to obey the US sanctions regime.

“And that economic power goes hand-in-hand with an extreme need for oil.”

China also uses refineries and shadow tankers to import crude from Russia and, previously, Venezuela. 

Iran’s shadow fleet has also been linked to sales of jet fuel to Myanmar, prompting criticism from human rights organisations amid air strikes against civilians during the ongoing civil war. 

Are shadow fleets illegal?

There are no UN sanctions on Iranian oil itself, meaning there is nothing inherently illegal about buying and selling Iranian oil under international law. 

Such sanctions would need to be approved by the UN Security Council, where China and Russia have frequently used their veto power to block western measures against Iran.

But some of the ships themselves may breach legally binding environmental, safety and labour regulations set out by the International Maritime Organization (IMO), which is part of the UN.

Enforcement of these rules is often limited, with legal responsibility usually falling on the states where the ships are registered and the ports at which they dock. Outside territorial waters, they are protected by freedom of navigation under international law.

The tankers are not alone in breaching conventions set out by the IMO. Many fishing vessels, for instance, also turn off their tracking systems to evade scrutiny, which is likewise considered illegal and dangerous. 

Why are environmentalists worried?

Many tankers used to sell Iranian oil are at least 20 years old, with some over 30, increasing the probability that they will leak oil.

Vessels carrying Russian oil have been linked to spills, and analysts say that the Iranian fleet poses similar risks. 

A Chinese firefighting vessel sprays water on the burning oil tanker Sanchi off the coast of eastern China in January 2018 (AFP/Transport Ministry of China handout)

Some of Iran’s shadow tankers are classed as “very large crude carriers”, meaning that they carry more than 2m barrels of oil. To give an idea of scale, the 2010 Deepwater Horizon disaster released an estimated 4m barrels into the Gulf of Mexico. 

There is also a risk of collision when ships turn off their tracking data. In January 2018, the Iranian-owned tanker Sanchi collided with another vessel off Shanghai and sank, killing 32 crew members and releasing an estimated 960,000 barrels of oil.

What has been done to stop the fleet?

Washington and others are trying to crack down on shadow fleets, which challenge the effectiveness of western sanctions.

At the heart of this is the US military blockade of Iranian ports, which aims to intercept all vessels leaving Iran. Marine intelligence websites have noted, however, that several Iranian tankers have bypassed the blockade regardless.

But even before the war, the US and UK stopped ships, including outside of their territorial waters, linked to Iranian, Russian and Venezuelan oil shipments. 

In some cases, this happened after the US and others put pressure on the states where the ships were registered to withdraw their flags from the vessels. 

This renders the ship stateless, placing it in violation of international law and giving the US and others the right to seize it.

Crew from the Iranian tanker MT Horse board their ship in May 2021 before leaving Indonesian waters after their vessel was seized and a court case concluded (AFP/Indonesia Maritime Security Agency)

“When this happens, the seizure might technically fall under the letter of the law,” Khalili said. “But it’s also a form of the projection of US power, as it's very much the US forcing the flag states to place those ships outside of the law.” 

The US has also put pressure on Malaysia to crack down on shadow tankers exploiting a legal loophole that allows ship-to-ship transfers with little scrutiny in the Eastern Outer Port Limits, part of Malaysian territorial waters. Enforcement, however, has so far been scattershot.

Western countries have formed a Shadow Fleet Task Force to coordinate their crackdown. The US, EU, UK and others have also sanctioned individual vessels when they can be identified, making it harder for them to use maritime infrastructure. 

The US has also begun sanctioning China’s "teapot refineries," but Beijing has pushed back by ordering Chinese businesses not to comply with unilateral US measures.

“The Chinese government has consistently opposed unilateral sanctions that lack authorisation from the United Nations and a basis in international law,” it said in a statement in May. 

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