Jerusalem Center for Security and Foreign Affairs (JCFA)

Iran threatens a large-scale war against Israel, but where does the money come from that Iran uses to finance its anti-Israel terror? Israel’s enemies – Iran, Hamas, the Houthis, and Hizbullah – have all been hit hard, losing troops, training facilities, tons of weaponry, and miles of tunnels; senior figures have been assassinated. Yet, the Ayatollah regime continues to benefit from its engine of revenue: the large-scale oil exports that enable it to keep financing the anti-Israel activity.

Revenues from the black gold continue to flow despite the many sanctions imposed on the country since 2019 to stop oil exports. Iran counteracts these sanctions with more than 300 tankers registered in foreign countries, which form a “ghost fleet.” This fleet sails to its destinations by turning off or disrupting navigation and identification systems (AIS) and using false registration documents.

To cover the tracks of this maritime traffic, Iran routinely takes other measures—for example, transferring oil from tanker to tanker, falsely registering a source of the oil as a third country, and using complicated money transfer networks among various parties and companies along the way. Iran tempts its customers to buy oil from it, despite the sanctions, with a 15% discount on the price per barrel. According to market experts, that discount does not entail losses for the ayatollah regime because the marginal cost of production in Iran is low compared to other countries.

Washington’s Sanctions and Iran’s Progression to Terror

“In their budget projections, the Iranians set revenues based on 1.35 million barrels per day,” Aviram Bellaishe told Globes.¹ Bellaishe, vice president of the Jerusalem Center for Public Affairs and a former member of Israel’s security establishment, is in charge of relations with Arab countries, including some with which Israel has not signed agreements. “This is lower than the current production, so they plan to raise taxes. It is clear that selling oil is Iran’s first priority. The Iranians have been mysteriously operating in shipping lanes for a long time. When you see their oil tankers bypassing sanctions, you can understand how important it is to them.”

A major challenge for Washington’s sanctions is that the Iranians are progressing in their sales at a faster pace than the Americans can sanction. For example, through July 18, 2024, the United States slapped sanctions on 48 ships, including 41 tankers. Yet Lloyd’s List notes that since the beginning of the year, the ayatollah regime has expanded its ghost fleet with tankers totaling 3.85 million dwt (capacity—a unit of measure for the maximum weight a ship can carry). An especially small tanker carries 50,000 dwt, and an especially large one is 550,000 dwt.

Bellaishe notes that just last June, former Iranian foreign minister Mohammad Javad Zarif said Ebrahim Raisi’s government had been able to sell so much oil in recent years because of the failure to implement sanctions. “The Iranians are benefiting from the Biden administration’s unwillingness to enforce the sanctions, to keep oil prices from rising—which would affect the inflation in the United States.”

Iran Sells to the Largest Importer in the World – and Reaps Anti-Israel Terror

Demand for Iranian oil comes mainly from the largest importer in the world, China. According to the maritime traffic monitoring company ARGUS, China buys 85%-90% of the approximately 1.5 million barrels per day that Iran exports. According to the UANI organization, in June, the quantity of oil spiked 17% compared to the same period last year. From the beginning of President Biden’s tenure in January 2021 to December 2023, the ayatollah regime’s revenues from oil exports to Beijing crossed the bar of $100 billion.

Data from Chinese tax authorities reveal that in 2023, China imported about 11.3 million barrels of oil daily, more than 10% more than in 2022. Amid the dramatically rising demand in the post-COVID-19 era, the U.S. Energy Information Administration (EIA) records that in 2023, the Chinese refineries imported more oil than ever before, seeking to meet the needs of the local transportation industry. Over the past year, China’s primary sources of oil were Russia, Iran, Brazil, and the United States. In the first quarter of 2024, 11% of the total came from Iran.

“As a power, China is deepening its presence in the Middle East, whether in Saudi Arabia or through contacts between the Palestinian factions, because it sees a vacuum and American weakness,”² explained Bellaishe, who researches the field of influence and consciousness. “It has been written in the Iranian media that thanks to China, Iran has protection against the sanctions. China uses various means to spread its influence in the Middle East, including TikTok, where anti-Israel expressions occur at a high volume, which indicates what is happening behind the scenes.”

As far as Beijing is concerned, the Jerusalem Center for Public Affairs vice president emphasized that dealing with China involves an inter-power struggle and should be regarded as such. “Conveying a message in this case should be done by the United States, Israel, and everyone aware that the Chinese are buying Iranian oil. I hope that after the U.S. elections, Israel will be able to generate international involvement in the issue. Israel must tighten the alliance with the countries of the region and connect it with the United States as part of the important approach to the struggle between the powers.”

The Iranian Economy Is Being Kept “Above the Waterline”

The Chinese oil purchases are helping keep the Iranian economy “above the waterline.” The Iranian population, however, is in a difficult situation. The Statistical Center of Iran reported that 930,000 students left the Iranian education system in the last year. The Islamic Parliament Research Center of the Islamic Republic of Iran found that 15% of children in the country have to work, with 10% unable to go to school because of their work. Last year, the Iranian Ministry of Interior found that 60% of the population is below the poverty line.

On the other hand, the International Monetary Fund (IMF) found that in 2023, the Iranian economy grew by 4.7%, led by 19% growth in the oil sector. Last year, the Iranian production rate grew from half a million barrels per day to 3.1 million per day. At the same time, Iran’s oil production is expected to grow this year and next by only 100,000 barrels; hence, the IMF predicts a slowdown in which the GDP will grow by 3.3% in 2024 and 3.1% in 2025.

“The best Iranian minds are emigrating while Afghan immigrants are entering,” Bellaishe commented. “Iranians demonstrate against the Iranian foreign policy that invests in proxies in Gaza, Syria, and Lebanon. We saw that right after Supreme Leader Ali Khamenei called for attacks on Israel’s economic arteries,³ an Israel-related ship was attacked. Later, when he appealed to the Muslim countries ‘to cut ties with Israel,’ it was only a short time before Turkey decided to cut its trade ties with Israel. Iran invests greatly in blocking Israel’s transportation arteries.”

The expert concluded that just as Khamenei called for attacking Israel’s economic arteries, Jerusalem must implement a policy of “an artery for an artery.”⁴ Bellaishe continued, “The Iranian economy is based on oil products and needs foreign currency. We saw during the Trump administration how much the enforcement of the sanctions affected the Iranian economy. If the Bab el-Mandeb strait is important to Israel, then there is an artery that is important to Iran. If you attack the Iranian oil tankers, then you hit the Iranian economy and the Iranian proxies. This can progress from legal activity based on sanctions enforcement to other activities that require international backing. The economic challenge is the cardinal one in the struggle against Iran.”

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