A recent report by the House Select Committee on China details how the nation is acquiring sanctioned oil from Iran, Russia, and Venezuela at discounted rates. This activity involves a network referred to as a “shadow fleet” of tankers used to circumvent international sanctions.

China's Shadow Fleet and Sanctioned Oil

The investigation found that sanctioned oil now accounts for approximately one-fifth of China’s total oil imports. This has allowed China to stockpile a significant strategic reserve, estimated at roughly 1.2 billion barrels by early 2026 – equivalent to about 109 days of seaborne import cover.

Economic Impact on Rogue Regimes

Energy exports are crucial to the economies of Iran, Russia, and Venezuela. The report highlights that Russia’s energy exports generated around $120 billion in revenue in 2024, representing about 30% of its total revenue. Iran’s oil revenue is projected to exceed $50 billion in 2025, constituting roughly 35% of its national budget. Similarly, crude oil sales remain Venezuela’s primary source of foreign currency.

Energy Security Concerns and China's Response

China relies on foreign suppliers for approximately 70% of its oil, much of which is transported via sea routes potentially vulnerable to blockade during a crisis, such as a conflict over Taiwan. This vulnerability has led Chinese leaders to prioritize “energy security” as a critical component of great-power competition.

The Mechanics of Evasion

China employs a “shadow fleet” of older tankers operating under opaque ownership structures, registered under foreign flags, and insured by non-Western companies. This allows them to avoid compliance with Western maritime laws. Data from Kpler indicates that this shadow fleet transported about 10.3 million barrels of crude oil per day last year, with roughly one-third destined for China.

Additionally, the fleet moved 2.2 million barrels per day of heavy refined products, with China receiving about 10.3% of that volume. China also received approximately 45.8% of the shadow fleet’s chemical and biological cargo.

Committee Findings and Recommendations

“China is the buyer of oil from desperate, rogue regimes through illicit, hard-to-track channels involving shell companies, Chinese refineries and a shadow fleet of oil tankers,” stated Select Committee on China Chairman John Moolenaar, R-Mich. “This investigation brings to light key information on how the Chinese Communist Party keeps the economies of Iran and Russia afloat while fueling its own authoritarian agenda.”

Policy Recommendations

  • Authorize sanctions on ports, terminal operators, and businesses handling cargo from shadow fleet vessels.
  • Establish a whistleblower reward program to encourage reporting of sanctions evasion, particularly in hubs like Singapore, Hong Kong, Malaysia, and Dubai.
  • Have financial regulators investigate potential commodity market manipulation.
  • Develop a contingency framework with major oil producers like Saudi Arabia, the UAE, and Iraq to increase supply.

China’s oil sources have faced disruptions due to U.S. actions against Venezuela and the ongoing conflict in the Middle East, which has impacted oil tanker traffic through the Strait of Hormuz. Despite these challenges, Iran’s shadow fleet continues to deliver oil at near pre-war levels.