Editor’s Note: Umud Shokri is a veteran energy strategist, a senior visiting fellow at George Mason University, and a Title VIII Black Sea Research Fellow at the Middle East Institute. He specializes in global energy dynamics, climate change, and clean energy technologies and is the author of U.S. Energy Diplomacy in the Caspian Sea Basin.
By Barbara Slavin, Distinguished Fellow, Middle East Perspectives Project
With European nations triggering a mechanism that restored UN sanctions against Iran last week, the Islamic Republic has prepared by ramping up oil production and exports.
In the first 20 days of August, output hit 3.15 million barrels per day, the highest since 2018, while exports topped two million barrels per day, tapering off to 1.85 million barrels at the end of the month. China, which imports over 1.5 million barrels per day, continues to be Iran’s biggest customer while receiving large discounts. Iran has proven remarkably resilient in maintaining its oil exports in the face of growing geopolitical challenges and persistent sanctions.
Through facilities on Kharg Island, Iran supplied more than 268.5 million barrels between January 2023 and March 2025, mostly to China, Malaysia, and Singapore. This tenacity highlights the difficulties in implementing U.S. sanctions, as well as changing geopolitical conditions in energy markets.
The “snapback” mechanism in the 2015 Joint Comprehensive Plan of Action (JCPOA) gave participants the ability to unilaterally reimpose UN sanctions on Iran if it is judged to be non-compliant with the nuclear deal. Britain and France, in August, began the process of snapback in response to Iran’s failure to meet its obligations to the International Atomic Energy Agency, including a long-standing refusal to account for traces of uranium at undeclared sites, as well as the enrichment of large quantities of uranium to near weapons-grade.
Iran responded by promising to increase cooperation with the IAEA despite Tehran’s fury at the agency’s failure to condemn unprecedented Israeli and U.S. military strikes in June that caused heavy damage to its nuclear infrastructure. But Iran’s promises failed to dissuade the Europeans, and last-ditch talks at the United Nations last week also failed to postpone the day of reckoning. Under UN Security Council Resolution 2231, which codified the JCPOA, the ability to invoke snapback would have expired in October unless extended by the Council. A vote for a six-month extension failed in the Council on September 26. Sanctions returned the following day.
UN sanctions target the financial, maritime, and insurance sectors that support the oil trade but not oil exports themselves. So, it is unclear what impact snapback will have on Iran’s oil industry. It is likely, though, that renewed UN sanctions will, at a minimum, increase transaction costs and disrupt logistics.
Accustomed to stringent U.S. sanctions on the oil sector – which were lifted by the JCPOA but reinstated after the first Trump administration withdrew unilaterally from the JCPOA in 2018 – Tehran has become proficient at evasion measures such as ship-to-ship transfers of oil, disabling Automatic Identification System (AIS) tracking, and alternative payment mechanisms that circumvent the dollar-based international financial network.
To maintain exports, Iran employs price flexibility and seeks infrastructure improvements and diversification. Offering substantial discounts to secure demand and making investments in refining, pipeline capacity, and logistics to ensure stable flows, Iran targets markets in Latin America, Asia, and Africa, including Iraq and Venezuela, as well as China. These discounts support revenue streams even while they lower per-barrel income. Iranian crude prices in 2025 were generally in the low-to-mid single digits per barrel, occasionally as low as $7–$8. However, there have been sporadic reports of even bigger discounts.
The UN sanctions raise the risks of maritime surveillance and interdiction, prohibit insurance and protection and indemnity (P&I) coverage for tankers, enforce restrictions on shipping and vessel registry, and exclude Iran from payment settlement banking networks.
Barrels can still travel via covert channels, but the difficulty and expense of delivery are increased. Observers should expect more use of AIS transponder disablement, ship-to-ship transfers, flags of convenience and vessel identity changes, shipping through friendly or non-compliant states, and alternative payment methods like barter, third-party intermediaries, and non-U.S. dollar transactions.
Discounts, robust Asian demand, and marine avoidance strategies may keep baseline shipments between 1.5 and 1.8 million barrels per day. Stricter enforcement, depending on pricing and discount circumstances, could cut shipments to 1.0–1.2 million barrels per day, bringing Iran’s daily gross earnings down to about $45–$60 million. A possible market excess brought on by OPEC+ production adjustments and poor demand might put further pressure on export earnings. Although the economic and reputational risks for trade partners would significantly increase, Iran’s continued use of alternate export routes and demand from non-compliant purchasers will likely limit the snapback’s meaningful impact on export quantities.
Tehran can maintain oil exports in the face of mounting international pressure thanks to subsidized prices, shadow fleets, regional pipelines, and established buyer networks. Iran’s export resilience is anticipated to persist even though snapback will worsen its financial isolation, increase compliance costs and operational risks, and discourage long-term investments.
Tehran’s energy situation, therefore, becomes dichotomous, with stable export levels coexisting with heightened operational and financial fragility. Iran is also facing an energy shortage at home, particularly in natural gas, which underscores vulnerabilities that go beyond export dynamics.