In the South China Sea, approximately 60 kilometers off Malaysia’s coast, lies the world’s largest hub for the “shadow fleet” of tankers engaged in oil transfers to circumvent sanctions.
According to a Bloomberg investigation, oil transfers in this zone have doubled since 2020. In the first nine months of 2024 alone, an estimated 350 million barrels of oil passed through the area, valued at over $20 billion.
The transfers primarily involve Iranian tankers, which pass sanctioned oil to other vessels that then deliver it, mainly to Chinese ports. Officially, China has not imported Iranian oil since 2022, but this shadow trade persists.
This transfer zone falls within Malaysia’s exclusive economic zone but outside its territorial waters, limiting the country’s ability to monitor or control the activities. Moreover, Malaysia and neighboring countries show little interest in tightening oversight due to their economic and political ties with Iran and China.
The lack of enforcement highlights a critical gap in the global sanctions framework. To effectively curb such activities, sanctions must be expanded and rigorously enforced. Increased international cooperation is essential to close loopholes that allow sanctioned oil to flow freely, undermining efforts to limit the revenues of regimes like Iran and Russia, which use these funds to sustain geopolitical conflicts.
