A new report reveals how the Iranian regime’s shadow oil exports and military partnership with China are reshaping global security and undermining sanctions.
London-based maritime risk firm Dryad Global has released a detailed report exposing how the flow of Iran regime’s sanctioned crude oil, China’s growing military purchases, and the expansion of the “shadow fleet” are reshaping global risk structures for shipowners, charterers, insurers, and ports.
According to the report, the “oil-for-weapons” trade cycle between China and the Iranian regime — rooted in their 2021 Comprehensive Strategic Partnership Agreement — enables Tehran to covertly finance its military programs and proxy operations through illicit oil exports, in exchange for advanced Chinese military technologies.
Dryad Global warns that even though the agreement is not fully operational, it has already weakened international sanctions mechanisms and poses a serious threat to regional stability and Western strategic interests.
Scarlett Suarez, the report’s author and analyst, said, that their findings show that this trade cycle has created a structure resistant to sanctions. It allows the financing of proxy wars while increasing the number of shipments moved by old, uninsured vessels — a combination that raises both operational accident risks and regulatory exposure for legitimate maritime operators.
China’s Role and Iran’s Expanding Shadow Fleet
Reuters reported in September that Tehran now sells oil to China at double the previous discount, from $3 to $6 per barrel compared to early 2025 levels.
Since January 2025, the United States has launched an aggressive campaign against Iran regime’s oil exports and related trade networks — especially in China — under Executive Orders 13902, 13846, and National Security Memorandum No. 2. This effort has resulted in 19 rounds of sanctions and the designation of 253 entities and vessels tied to the regime’s regional financing operations.
Despite these sanctions, more than $500 million in Iranian regime assets have been frozen, but oil exports continue to surge — confirmed recently by Iran regime’s oil minister. This resilience stems largely from China’s defiance, yuan-based payments, the use of state-owned intermediaries, and a web of concealed shipping operations.
Beijing now buys over 60% of Tehran’s oil exports, effectively undermining U.S. sanctions and proving that unilateral restrictions face limits against the regime’s shadow trade network.
Proxy Wars and Rising Maritime Threats
According to data from U.S. Naval Forces Central Command, Iran-backed Houthi forces in Yemen have conducted over 130 attacks in the Red Sea and Gulf of Aden since 2024, using drones and missiles equipped with Chinese-made components.
The integration of Chinese guidance systems into Iran’s Shahed-136 drones and anti-ship ballistic missiles has increased both the accuracy and lethality of these strikes. U.S. Central Fleet reports that Houthi attack success rates rose by 40% compared to 2023.
Dryad Global warns that if the oil-for-weapons trade continues, Tehran will gain even greater oil revenues, doubling the Houthis’ strike capabilities and expanding the resources available to the Islamic Revolutionary Guard Corps (IRGC) and its proxies.
The report also cautions that the IRGC and its affiliated groups could resume piracy-style operations, similar to the 2019 seizure of the Stena Impero tanker. Cyberattacks and GPS interference incidents in the Persian Gulf throughout 2024 — attributed to IRGC-linked hackers — further highlight growing asymmetric threats.
Access to Chinese dual-use technology has strengthened the IRGC’s ability to conduct cyber and drone-based maritime harassment, with potential spillover to groups like Hezbollah and Iraqi militias operating in the Mediterranean and Persian Gulf. The Maritime Security Council’s 2025 report warns that, without intervention, maritime attacks could rise by 30% by 2027, especially in the Strait of Hormuz.
A Network of Cover Companies and Illicit Arms Routes
The oil-for-weapons network also facilitates the illegal transfer of dual-use components to Tehran’s proxies. Since 2024, Chinese-made parts have been shipped via front companies and disguised trade routes through Latakia, Syria, and Aden, Yemen, enabling the delivery of missile, drone, and small-arms components.
Dryad Global warns that expanding this network will make cargoes increasingly complex and harder for Western naval coalitions to track, threatening global maritime stability and stretching security resources across multiple regions.
A Global Trade and Security Crisis
In its conclusion, Dryad Global emphasizes that shipowners, charterers, and insurers cannot treat this as a distant geopolitical issue.
“This is an immediate commercial risk,” the report states, noting that the spread of shadow shipments, forged documentation, and intricate corporate networks demands far stricter voyage verification and destination risk assessment.
The firm concludes that the Iranian regime’s illicit oil trade — sustained through Chinese cooperation — not only funds regional wars but also endangers global shipping safety and the integrity of international trade.
