Analysis: The Iranian shadow fleet and its secret alliance with China

On July 30, 2021, an unmanned Iranian drone attacked an Israeli-owned merchant ship in the Gulf of Oman. 

A British and a Romanian citizen were killed in the attack.

This attack was after a series of reciprocal maritime attacks between Israel and Iran in the past year, in which Iran attacked several Israeli-owned merchant ships, and Israel, according to foreign sources, attacked Iranian pirate oil tankers in the Mediterranean and the Persian Gulf.

The latest attack in which two European citizens were killed has raised the Iranian sanctions economy issue on the European agenda, even for a brief moment. 

But after the EU sent a representative to the inauguration ceremony of the new Iranian president, known for his extremism and belligerence, the Iranian pirate oil issue has likely dropped very quickly from the EU agenda, which is primarily devoted to the fight against COVID-19 and annual summer vacations.

Since 2018 and the Trump administration's imposition of sanctions on Iran, Iran has struggled to bring foreign currency into the country and improve its deteriorating economic situation. 

As a result, the Trump administration has banned oil purchases from Iran and a long list of financial restrictions, including a ban on foreign investment in Iran.

Iran, whose primary income resource was oil, realized in the last year of Trump's term that it must pour cash into its pockets and bring food to its hungry citizens. 

The Iranian government began to act bravely in the face of US sanctions and, in 2019, began to operate its fleet of oil tankers in a pirated operation.

The Iranian tanker fleet includes about 143 tankers, capable of carrying more than 102 million barrels of crude oil or fuel and 11.8 million barrels of liquefied natural gas daily, with a total value of over $7.7 billion per day.

Thus, with its tanker fleet, Iran began to transport oil secretly to China, North Korea, Russia, Syria, Lebanon and Venezuela. 

Venezuela, by the way, is a country rich in oil reserves and, until a few years ago and the American sanctions imposed on it, was one of the largest oil exporters in the world. However, US sanctions have disrupted Venezuela's oil production capabilities, which must now be imported to support its needs.

And how does China fit into the Iranian effort?

China has seen Iran for several decades as a strategic partner in implementing its "Belt and Road Initiative" (BRI), a strategy led by Xi, the Communist Party leader, since September 2013. China has funded the BRI strategy for over $300 billion since 2003 until today. Many hundreds of billions more are expected to be spent in the next decade.

Iran and China signed a strategic cooperation agreement in the early 2000s. 

Based on this agreement, China transferred technological knowledge and production lines of weapons, aircraft and missiles to Iran. In return, Iran supplied oil, which China needed to realize its vision and economy.

Iran is China's main oil supplier and its geostrategic location, between the Caspian Sea and the Arabian Sea, is the only land bridge from Central Asia for China. 

In other words, investing in Iran is also a bridge for China to be a global power and not just a regional one.

Moreover, Iran's perspective toward the United States and other Western countries, and the hostility between them, is an essential tool in the hands of China. 

China, whose strategy is indirect warfare (also known as "non-contact" warfare). For China, Iran is a frontier state against the US in the Persian Gulf. It draws the US attention from the South China Sea, where China conducts a real naval campaign and takes over maritime territories belonging to the region's countries.

In 2019 China and Iran renewed the strategic agreement between them, which guarantees China a more significant foothold in Iran, control over intelligence gathering in Iran, and additional resources for China's use.

As part of its strategic support, China is also assisting Iran in selling pirated oil and using the Iranian tanker fleet — the new shadow fleet — for oil-bypassing sanctions. 

Over the past year, China has purchased more than 700,000 barrels of oil from Iran daily. This Chinese-sponsored oil export allows Iran to maintain regime stability and inject foreign money into the state coffers.

China is even helping Iran operate its shadow fleet so that the tankers will not be detected. 

For example, the tankers transmit their incorrect location in the Automatic Identification Systems, the AIS, required by international shipping laws. More than that, the tankers were repainted, and the tankers' names were changed to cover the real identity of the tankers. 

In addition, the Iranian shadow fleet tankers are changing their flag frequently. This move is backed by a global operational infrastructure set up by the Iranian Quds Force, which includes a huge array of straw companies whose tankers are registered as owned.

With the help and support of China, the Iranian cat-and-mouse game allows Iran to continue its bypassing economy, ignoring the US sanctions, especially during US President Joe Biden's weak administration. 

This is how Iran manages to inject much money into its coffers, revive its economy and continue its arms race to build offensive capabilities and complete its nuclear program, to which it is so close.

Dr. Eyal Pinko served in the Israeli Navy for 23 years, in operational, technological, and intelligence duties. He is a senior researcher and has published more than 200 articles. Dr. Pinko is currently CEO at Terra Strategic Solutions and president at the International Institute for Migration and Security Research.