Iran races to sell oil stored in China

The oil is from a stockpile of at least 25 million barrels that Iran sent to China in late 2018, when it feared the imposition of new sanctions by the first Trump administration would prevent the country from exporting oil, those people said.

China gave its approval for the drawdown and shipments last month following talks in late November and December with Iranian officials, the people said. It isn’t the first time Iran has sought to draw down and sell the oil, the people said, but Beijing hadn’t previously given the greenlight.

A Chinese Foreign Ministry spokesperson said they weren’t aware of the situation but said that Beijing cooperates with all countries, including Iran, within the bounds of international law. China has opposed the U.S. “abuse of illegal and unreasonable unilateral sanctions," the spokesperson said.

Iran’s U.N. mission in New York declined to comment. The U.S. State Department didn’t immediately respond to a request for comment.

The additional oil revenue comes at a crucial time for Iran, as it tries to support its allied militias in the region, such as Hamas and Hezbollah, which have been battered in conflicts with Israel. The fall of the Assad regime came as another blow, choking off the land route that Iran used to supply Hezbollah with cash and weapons. Iran, meanwhile, is facing high inflation and sluggish growth.

China’s decision to allow Iran to ship the oil could stoke tensions with Washington, as President-elect Donald Trump prepares to take office. In his first term, Trump moved aggressively to curtail Iranian oil sales.

Trump’s transition team has said he would return to his maximum pressure campaign once he takes office Jan. 20. China, as the largest buyer of Iranian oil, could be critical to that effort. Trump might have to decide what he wants to give priority to in his relationship with Beijing, given his demands on trade and other issues.

The oil that Iran stored in China in 2018 has been at two ports—in Dalian, east of Beijing, and Zhoushan, south of Shanghai, the people said. Two vessels—the Madestar and CH Billion—recently set sail for Dalian, the people said.

Madestar left the Dalian port in early January loaded with 2 million barrels of oil, and the CH Billion is believed to be still docked there, set to be loaded with 700,000 barrels, they said.

Madestar stopped transmitting its location and planned route under the AIS international signal system for three days in early January while it was in the waters off Dalian, the people said. During that time, it traveled to the port, they said. It then headed to waters off South Korea to transfer the oil to another ship, they said. CH Billion only transmitted its location data for a brief period on Jan. 6.

Data from ship-tracking service MarineTraffic confirmed the movements of the ships described by the people.

If Iran were to sell the entire stockpile at today’s prices, that value would be over $2 billion. Iran could earn up to $1 billion, the people said. Tehran owes China around $1 billion in storage fees, the people said.

The concerns about the shipments are deepened by the involvement of Iran’s Islamic Revolutionary Guard Corps in the operation, the people said. Tehran has earmarked the proceeds for the IRGC, which funds and arms Iran’s network of militias throughout the Middle East, some of the people said.

China has long been the largest buyer of Iranian oil, but since 2022 it has stopped officially purchasing Iranian oil for fear of U.S. sanctions, according to data from commodities research firm Kpler.

Iran has set up intricate shipping networks to export oil to China disguised as oil from other countries. Even if a Chinese buyer wanted to purchase the oil that had been held in storage, to avoid violating sanctions, it would need to be shipped out of China and return marked as non-Iranian oil.

U.S. officials have sought to prevent Iran from shipping the oil, by pressing China and other countries not to participate and imposing sanctions on vessels that it believed could help transport the oil. U.S. officials specifically raised concerns about the money flowing to the IRGC in its contacts with Beijing, one of the people said.

The U.S. Treasury Department sanctioned 35 entities and vessels on Dec. 3 that it said played a role in transporting illicit Iranian petroleum to foreign markets. Several Hong Kong and Chinese-owned vessels were affected.

Then, on Dec. 19, the Treasury sanctioned additional vessels and entities, including a Chinese-owned company, “to stem the flow of revenue that the Iranian regime uses to support terrorism abroad, as well as to oppress its own people," the department said.

Iran exported 587 million barrels in 2024, according to United Against Nuclear Iran, a nonprofit group that campaigns against threats it says are posed by Tehran. China imports accounted for 91% of Iran’s total exports, the group said.

But much of the funds from those sales have remained abroad because of the impact of U.S. financial sanctions on Tehran, said Gregory Brew, senior analyst for Iran and energy at Eurasia Group, a consulting firm.

Even if Iran is ultimately able to sell all the oil now stored in China, it is unclear exactly how much money it would make. Iranian oil already sells at a discount to market prices as a result of sanctions. With Washington having tightened sanctions, some vessels won’t take the risk of transporting it, analysts say, escalating the costs of selling the oil and reducing the speed at which it can be sold.

Joe Wallace and Clarence Leong contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com, Bojan Pancevski at bojan.pancevski@wsj.com and Costas Paris at costas.paris@wsj.com