By Georgi Kantchev and Summer Said
Iran exported more oil in 2025 than it had done in years, smuggling crude in defiance of sanctions, mainly to China. At the same time, the regime's profits from the commodity collapsed.
The falling price of global crude compressed prices, but the decline was largely driven by a web of middlemen and buyers taking advantage of the regime's precarious position and dependence on oil revenue. They know Tehran has few other ways to unload its sanctioned oil apart from through its shadow fleet, a global network of aging tankers that the Trump administration is pursuing with sanctions and special forces.
Now, those involved in the Iranian oil trade are demanding even higher fees for handling the crude. Buyers are also increasingly exploiting the restrictions on Iran to get the sanctioned oil at even deeper discounts.
The drop in oil revenue is sharpening the economic crisis in Iran that triggered days of deadly protests -- the biggest challenge to the Shiite leaders in their more than four decades in power.
This month, the U.S. imposed new sanctions on Iran in response to its government crackdown on protesters, inflicting penalties on individuals and entities linked to "laundering the proceeds of Iranian petroleum and petrochemical sales to foreign markets," the Treasury said.
The threat of U.S. military action against the regime appears to have receded for now, though Trump administration officials say all courses of action are still on the table. But the underlying problems that pushed Iranians onto the street remain, not least its increasing difficulty selling oil.
Adding to the stakes for global energy markets: Tehran, a founding member of OPEC, is responsible for around 3% of daily global oil output. Some analysts estimate Iran's full-year sales of crude totaled about $30 billion last year, with Iran keeping roughly two-thirds as profit, they say. Tehran's profits in prior years have been at times much higher, according to oil-industry officials and analysts, though precise figures aren't available.
Sanctions mean the Iranians and the others involved in the trade have to set up new intermediaries to help get around them, said Gregory Brew, senior analyst for Iran and energy at Eurasia Group consulting firm. "Everybody takes a cut."
An internet blackout imposed when demonstrations spread across Iran this month has left the Organization of the Petroleum Exporting Countries with little visibility into the current state of Iran's oil sector, complicating efforts to monitor production levels and maintain market stability.
Gulf members of OPEC have reported a significant breakdown in communication with their Iranian counterparts, according to Gulf delegates.
Iran sells its crude mainly to small Chinese refiners known as teapots, which don't operate internationally but need cheap crude to compete domestically.
Falling oil revenue has dented Iran's foreign-currency earnings, on which the country depends to pay for imports and support its drastically weakened currency, the rial.
Crude slumped last year due to increased output around the world and fears about the state of the global economy. A barrel of Brent, the global oil yardstick, is now selling for about $66, and benchmark U.S. crude for around $61. Both are down close to a fifth from a year ago. Prices have been volatile in recent days as traders weigh the likelihood of disrupted flows.
Widespread demonstrations that erupted in Iran in late December were sparked by the dramatic devaluation of the rial. A government crackdown appeared to have quelled days of protests, but the economic situation remains dire. The death toll in the unrest stands at more than 5,000 people, according to the group Human Rights Activists in Iran.
Trump said he would impose a 25% tariff on countries that do business with Iran, adding to the threats the country's oil lifeline faces.
"My base case is a slowdown or even a decline in Iranian oil production and Iranian oil exports," Brew said. A deterioration in the domestic situation or regime collapse would likely worsen that outlook, he said.
The impact of Trump's tariff announcement on Iranian oil exports hasn't emerged so far but remains a threat to the regime. Analysts say Washington might want to avoid slapping a new tariff on China, the main buyer of Iranian oil, with which it has reached a trade truce. But new levies on Iran's partners could make it harder and more expensive for Tehran to evade sanctions.
Since the June war with Israel, Tehran has been able to stabilize its oil export volumes despite sanctions, and even increase them in some months. In October, it shipped nearly two million barrels a day -- a multiyear high, according to Capital Economics. In 2025 as a whole, Iran sold more oil than in any year since 2018.
To achieve that, Iran has leaned on China and its shadow fleet, which currently consists of 613 tankers, including 180 very large crude carriers, according to ship monitoring website TankerTrackers.com.
China's small teapot refiners, which the fleet supplies, have less exposure to sanctions and their thirst for discounted crude makes Iranian barrels attractive. Iranian crude accounts for some 15% of China's crude imports, according to Capital Economics. China doesn't include Iranian oil imports in its official statistics.
Iran isn't the only option for the teapots, however. Russian oil, shunned by the West since Moscow invaded Ukraine in 2022, is also on China's energy shopping list. That has allowed Chinese buyers to demand an extra discount for Iranian barrels.
Since the West imposed new sanctions on Iran last year, Iranian crude has shed value compared with international Brent: While a barrel of Iranian oil sold for $1 less than the global benchmark at the start of 2025, by the end of the year it was $8 cheaper, according to data provider Kpler.
Getting the crude to the Chinese refiners has also become more difficult and costly.
The cost of so-called ship-to-ship transfers that are needed to conceal a cargo's true origin has risen as everyone along the supply chain dealing with sanctioned oil incurs new costs and raises their prices.
"The main problem is logistics," said Homayoun Falakshahi, head of crude oil analysis at Kpler. "Logistics means higher cost. Logistics means more middlemen. And that means lower revenues."
Analysts said the Iranians would continue to find ways around sanctions, but would have to contend with lower revenue.
With the Trump administration pursuing shadow fleet tankers in international waters, shipping costs are also expected to rise, analysts say. The U.S. has seized six oil tankers that have moved oil from Iran, Russia or Venezuela so far and promised more action.
Meanwhile, the Trump administration's capture of Venezuelan strongman Nicolás Maduro this month cost Tehran a longtime ally and a partner in black-market oil. Trump's desire to flood the market with Venezuelan crude to lower prices could pose a challenge to Tehran, though rebuilding Venezuela's dilapidated industry will take years. In the short term, reduced flows of Caracas's crude to China could allow Iran to increase its market share there.
Gulf countries have cautioned that Iran's system to sell its oil may break down if the regime itself collapses, according to the Gulf OPEC delegates.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Summer Said at summer.said@wsj.com
(END) Dow Jones Newswires
January 25, 2026 23:00 ET (04:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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