The move by Britain, France, and Germany to revive international sanctions on Iran is unlikely to significantly reduce Tehran’s oil exports but could create opportunities for Chinese refiners to secure larger volumes of discounted crude.
On August 28, the three European nations triggered a 30-day process that paves the way for the reimposition of U.N. measures on Iran.
The sanctions, expected to take effect at the end of the month, cover arms sales, ballistic missile development, asset freezes, travel bans, and restrictions on nuclear-related technology.
They also provide a legal basis for the European Union and Britain to reintroduce limits on banking, shipping, and energy transactions with Iran.
The snapback effectively signals the collapse of the 2015 nuclear agreement, which aimed to constrain Iran’s nuclear program in exchange for sanctions relief.
The deal was already weakened after the United States withdrew in 2018 under President Donald Trump and reinstated strict American sanctions.
Oil Exports Resilient Despite Sanctions
Iran’s crude exports have repeatedly proven resilient in the face of Western restrictions. Exports dropped from 2.2 million barrels per day (bpd) in 2011 to below 1 million bpd in 2014.
After the 2015 deal, shipments recovered to 1.85 million bpd by 2017 before collapsing again to 444,000 bpd in 2020 following renewed U.S. sanctions.
Since then, Iran has rebuilt exports through opaque supply chains involving reflagged tankers, ship-to-ship transfers, and undisclosed intermediaries.
Data from Kpler shows shipments recovered to 1.5 million bpd in 2024 and have averaged around 1.6 million bpd this year, with nearly 80 percent delivered to China.
China’s Refiners Set to Benefit
The renewed sanctions raise compliance risks for European and Asian buyers but are unlikely to deter China, which has consistently ignored Western restrictions. Beijing has even imported liquefied natural gas cargoes from Russia’s sanctioned Arctic LNG 2 project in recent weeks, highlighting its willingness to defy Western pressure.
With other buyers potentially pulling back, Chinese refiners are expected to negotiate deeper discounts on Iranian crude, improving margins and strengthening their position in global oil markets.
Market Implications
While the snapback sanctions may cause temporary disruptions in shipping and finance, global crude balances are unlikely to shift meaningfully.
Iranian barrels are expected to continue flowing, largely into Asia, sustaining Tehran’s critical oil revenue, which accounted for about a quarter of its GDP in 2024.
For the broader oil market, the immediate impact could be a short-lived premium on Brent prices due to headline risk, but fundamentals point to a continuation of the status quo: Iranian exports rerouted rather than removed.
