Oil and gas in the capitals: Can President Trump reduce Iran's oil exports significantly?

ANAS ALHAJJI, CONTRIBUTING EDITOR, MIDDLE EAST 

President Trump aims to significantly reduce Iran’s oil exports. His team believes they can surpass their first-term success. However, 2025-2028 differs from 2017-2020. The factors that cut Iranian oil exports in 2019 no longer apply. Iran’s oil exports are secretive, with media underreporting figures, due to tankers disabling transponders. Stronger enforcement pushes Iran’s fleet further underground. 

After reimposing sanctions in late 2018, Iran’s oil production and exports dropped sharply. Production fell 1.67 MMbopd from May 2018 to October 2019, per OPEC Secondary Sources, while exports declined 2.45 MMbopd, per Kpler. Repeating this requires Trump to invest significant political capital to stop trade between Iran and its U.S.-allied neighbors. Sanctions enforcement may minimally affect global oil markets and could lower prices, if Trump convinces some OPEC members to increase production, as in late 2018, when prices dropped 30%. 

Here’s why 2025 sanctions won’t replicate 2019 results: 

The number of buyers declined from over 20 to 1. Iran exported oil to over 20 countries before the reimposition of sanctions in 2018. Now, nearly all exports go to China. After sanctions were reimposed, some countries stopped importing Iranian oil, but Iran also cut off exports to nations refusing direct payment. Iran now receives cash and in-kind payments through a non-US-controlled financial system in China.  

Chinese oil majors comply with sanctions, halting “direct” imports, while independent refineries continue importing, and majors buy indirectly via third countries or ship-to-ship transfers. The media highlighted bans on direct imports from Iran and Russia by Chinese majors but overlooked encouragement of independent refineries, unaffiliated with the markets and financial institutions in the U.S. or Europe, to import this oil, then sold to the majors. 

Sanctions on ships and ports are ineffective. Sanctioned ships still transport oil when demand exists, and Iran and China adapt by shifting ports. Major ports with international ties block Iranian oil, but tankers unload at smaller ports or do ship-to-ship transfer. 

Payment system is not subject to the U.S. Iran and China have perfected sanction circumvention using technology, fleet management, and a payment system beyond U.S. control. Chinese refiners pay for Iranian oil, often depositing funds in a Chinese bank, which Iran uses to purchase Chinese goods. It is almost an in-kind trade.  

In 2019, Iranian production and exports fell, as some countries avoided Iranian oil to dodge Trump administration sanctions, and Iran refused to sell to nations who want to import Iranian oil but obey the sanctions and deposit the payment in an escrow account in a foreign bank. These concerns are obsolete; most Iranian oil now flows to China. 

Crude quality enables Iran to sell its entire oil exports to China. When Iran exported to over 20 countries in 2018 before sanctions, it supplied various crude types. As exports shifted to China, Chinese refineries required specific crudes, forcing Iran to reduce production and exports. 

Since then, Iran developed fields producing oil suited to Chinese refineries. Thus, some of the factors that caused the 2019 decline in production and exports no longer exist. 

Fig. 1. Iran’s crude exports by crude quality. Source: Kpler and EOA, 2025.

Figure 1 illustrates changes in Iran's crude export quality. Iran introduced new blends for Chinese demand, closing older fields known for heavy crude and shifting to West Karun fields near Iraq. Condensate exports also dropped. 

Oil exports now focus on lighter, medium crudes, reducing heavy grades. Lighter grades fetch higher revenues. Notably, "light" crude has an API around 33, while "heavy" is near medium with an API of 29. 

Iran closed old fields in 2019, which is not the case now. After signing the nuclear deal with the Obama administration and increasing oil production, the National Oil Company invested in new areas and closed older, inefficient, costly oil fields. Closures began post-sanctions, reducing production. Now, no old fields remain to be closed. Beyond crude quality and rising costs, the shift was strategic: shared border fields with Iraq, untapped by Iraq, let Iran bypass sanctions and claim Iraq's share. 

Conclusions. The factors that forced Iran to reduce oil production and exports in 2019 after sanctions no longer exist. Iran now circumvents sanctions with China's help, exporting nearly all its oil there, where the U.S. has no control over payments. Crude quality has adapted to Chinese refiners' needs. Iran's main issue today is not Trump sanctions but China's economic slowdown. 

Chinese oil majors, listed on U.S. and European stock markets and tied to the U.S.-controlled payment system, stopped importing directly from Iran. These firms also access Western banks and capital. However, China has navigated this before: it barred these companies from breaking sanctions while directing independent refiners, unlinked to Western markets, to import from Iran. The oil is then sold to the majors in China or routed through third countries like Malaysia. 

We believe the Trump administration won't reimpose sanctions on Iran without OPEC members pledging to boost production and exports to offset the expected loss of Iranian oil. This could depress oil prices. When sanctions hit in November 2018, oil prices dropped 29%. Enforcing sanctions on Iran isn’t bullish and may turn bearish, if OPEC ramps up output under Trump’s pressure.