Iran Uses Shadow Fleet to Move Oil Through Malaysia to China

Iran is increasingly relying on a "shadow fleet" of aging tankers to transport crude oil through a strategic anchorage off the coast of Malaysia, funneling revenue to the regime despite international sanctions [1]. This maritime hub, known as the Eastern Outer Port Limits (EOPL), serves as a critical transfer point where oil is moved between vessels before being shipped to Chinese refineries [1].

Key takeaways

• The EOPL anchorage off Malaysia saw at least 679 ship-to-ship oil transfers in 2025, a significant increase from 280 in 2023 [1].
• Approximately 90% of Iran’s oil exports are purchased by China, with much of the supply processed by independent "teapot" refineries in Shandong province [1, 2].
• Shadow fleet tankers frequently disable their automatic identification systems (AIS) and forge shipping documents to obscure the origin of the crude, often relabeling it as "Malaysian blend" [1, 2].
• The U.S. Treasury has warned financial institutions that facilitating transactions with refineries processing Iranian oil could expose them to sanctions [2].

The Mechanics of Cargo Laundering

The EOPL, located about 43 miles off the coast of peninsular Malaysia, has become a primary site for Iran to store and trade oil [1]. Because tankers from Iran often have a draft too deep for many ports, they utilize ship-to-ship transfers to move cargo to smaller vessels [1]. These maneuvers are frequently conducted under the cover of night with AIS trackers turned off to evade detection [1]. According to experts, this process acts as a "cargo laundering business," where ships change their names, flags, or documentation to create a new narrative for the illicit oil [1].

The U.S. government has intensified its efforts to disrupt this supply chain, recently seizing tankers like the MT Tifani and the MT Majestic X [1]. Despite these actions, the volume of activity remains high, with at least 250 transfers recorded in the EOPL between January and April 21 of this year [1]. The U.S. Treasury has also begun targeting the logistics network supporting these shipments, including port terminal operators in Shandong and specific teapot refineries, to cut off the revenue streams that fund Iran’s military and weapons programs [2].

Why it matters

The reliance on the EOPL allows Iran to maintain a steady export flow, providing a financial lifeline to the regime while the world faces a global oil shortage [1]. By positioning this "floating strategic reserve" near its primary customers in East Asia, Iran mitigates the risk of supply disruptions caused by potential hostilities in the Persian Gulf [1]. As the U.S. continues its "maximum pressure" campaign, the tension between enforcing sanctions and China’s continued purchase of Iranian crude remains a central point of geopolitical friction [1, 2]. With Iran’s primary export terminal at Kharg Island nearing storage capacity, the regime faces potential production cuts if it cannot successfully move its current inventory to market [2].