Important Chinese Port Bans Entry of Sanctioned Tankers Carrying Iranian Oil

The Shandong Ports Group, the largest oil terminal receiving oil from Iran, Russia, and Venezuela, has prohibited the entry of U.S.-sanctioned tankers amid a significant decline in Iran's oil exports over the past two months. The majority of Iran's oil is delivered through this port to Chinese refineries. Iran also delivers part of its oil at the Dalian and Zhoushan ports to small independent Chinese refineries, known as teapots, but the volume is much less compared to the oil unloaded in Shandong. Teapots are the only oil customers of Iran in China. Iran requires tankers known as 'ghost fleet' (or 'dark fleet') for clandestine oil exports to China, which involves turning off their automatic identification systems and conducting transshipment operations in the oceans to ultimately deliver oil to Chinese ports. The U.S. has sanctioned the 'ghost fleet' network used for smuggling Iranian oil. In October and September, the U.S. sanctioned dozens of tankers from the 'ghost fleet,' causing Iran's oil exports to China to fall below 1.3 million barrels in November and December, which is 550,000 barrels less than the September level. According to Reuters on Tuesday, January 8, citing Kepler data, Shandong ports received 1.74 million barrels of oil from Iran, Russia, and Venezuela daily last year, accounting for 17% of China's total oil imports. Now, no sanctioned tanker will be able to deliver sanctioned oil from Iran, Venezuela, and Russia to Shandong port. Reuters published the names of eight very large tankers, each capable of carrying two million barrels, that unloaded their cargoes in Shandong last month, most of which was Iranian oil. This report states that the recent sanctions on tankers carrying Iranian oil by the U.S. have increased shipping costs, and the Shandong Ports Group's actions will further raise the costs of circumventing sanctions for the Islamic Republic. In this context, Homayoun Falakshahi, a senior analyst at Kepler, told Radio Farda that the main factor behind the decline in Iran's oil exports over the past two months has been the U.S. sanctions against dozens of 'ghost fleet' tankers. He noted that since September, the amount of unsold oil on Iranian waters has more than doubled, peaking at 20 million barrels. Falakshahi also emphasized that the so-called 'teapot' refineries have low efficiency and create significant pollution, and the Chinese government has asked them to either upgrade or be phased out. In recent months, at least three teapots have officially declared bankruptcy. Investigations by Reuters indicate that Iran also reduced its oil production by 40,000 barrels last month, but Bloomberg's analysis suggests that the actual decline in Iran's oil production is much higher, around 70,000 barrels. Meanwhile, the American financial services giant Goldman Sachs predicted last week that the decline in Iran's oil exports would continue this winter, with daily oil and gas condensate production in Iran dropping by about 300,000 barrels. The reduction of Iran's oil exports to below 1.3 million barrels and the forecast of its continued decline come at a time when the government of Masoud Pezeshkian has projected daily oil exports of 1.85 million barrels in the next solar year budget. The issue of falling Iranian oil exports also coincides with Donald Trump, the elected President of the United States, set to enter the White House in less than two weeks, with expectations to revive the 'maximum pressure' policy against the Islamic Republic. The sanctions imposed against Iran during his previous presidency reduced the Islamic Republic's daily oil exports from 2.5 million barrels to less than 350,000 barrels. After the Biden administration took office, Iran increased its oil exports each year, averaging 1.55 million barrels last year.