A Congressional investigation has uncovered China’s extensive efforts to acquire sanctioned oil from countries facing international restrictions, including Iran, Russia, and Venezuela. The House Select Committee on China’s report details how China bypasses sanctions to procure significant quantities of oil from these nations.

China's 'Shadow Fleet' Operations

China is leveraging a ‘shadow fleet’ of tankers to transport the sanctioned oil, enabling it to build substantial strategic oil reserves at below-market prices. This practice undermines the effectiveness of Western sanctions and provides critical financial resources to the sanctioned regimes. The investigation highlights the use of opaque ownership structures and non-Western insurance to evade compliance with Western maritime laws.

Economic Impact on Sanctioned Nations

The investigation details the significant economic benefits these oil purchases provide to sanctioned countries. Russia’s energy exports generated approximately $120 billion in revenue in 2024. Iran’s oil revenue is projected to exceed $50 billion in 2025, representing a considerable portion of its budget. Venezuela also relies on crude oil sales as its primary source of foreign currency.

Building Strategic Reserves

China’s acquisition of discounted sanctioned oil has allowed it to build a massive strategic petroleum reserve, estimated at around 1.2 billion barrels by early 2026. This stockpile provides approximately 109 days of seaborne import cover, significantly enhancing China's energy security. Chinese leaders prioritize energy security as a critical aspect of great-power competition due to reliance on vulnerable sea routes.

Shadow Fleet Tactics

The ‘shadow fleet’ consists of older tankers operating under foreign flags and avoiding Western insurance, allowing China to evade scrutiny. This practice challenges the established global order and economic stability. Data from Kpler shows these tankers moved approximately 10.3 million barrels of crude oil per day last year, with roughly one-third destined for China.

Policy Recommendations

The Select Committee’s report proposes several policy recommendations to curb China’s procurement of sanctioned oil. These include imposing sanctions on ports and businesses involved in handling cargo from the ‘shadow fleet,’ establishing a whistleblower reward program, and investigating potential commodity market manipulation.

International Cooperation

The committee also proposes creating a contingency framework with major oil producers like Saudi Arabia, the UAE, and Iraq to expand supply and reduce incentives for buying sanctioned oil. The report acknowledges challenges from U.S. actions against Venezuelan leaders and disruptions in the Strait of Hormuz, but emphasizes the need for robust enforcement and international cooperation.

Chairman of the Select Committee emphasized that China is the primary purchaser of oil from these rogue regimes, utilizing illicit channels and a shadow fleet to sustain their economies while pursuing its own agenda.