Shadow Fleet Rising: Malaysia’s Waters Become the New Frontline for Iran-to-China Oil
As US sanctions tighten, a growing fleet of “dark” tankers is using Malaysia to funnel discounted Iranian crude to China—reshaping global energy trade and challenging the future of sanctions enforcement.
Jun 3, 2025
Oil Tankers Go Dark: How Sanctioned Iranian Crude is Quietly Powering China’s Economy
As Western sanctions escalate, a shadow fleet emerges—turning Malaysia’s waters into a high-stakes transit point for the world’s most controversial oil flows.
The New Epicenter of “Dark” Oil: Malaysia’s Covert Role
With US and EU sanctions tightening on Iranian oil, a sophisticated cat-and-mouse game is accelerating across Asian waters. The latest moves? Tankers carrying sanctioned Iranian crude are switching off their transponders off the coast of Malaysia, effectively vanishing from digital tracking systems before reappearing fully laden in Chinese ports. This tactic, known as “going dark,” is turning Malaysia into a critical—and increasingly scrutinized—hub in the Iran-to-China oil corridor.
Why Malaysia? The sheltered, congested waters of the Malacca Strait offer ideal cover for ship-to-ship (STS) transfers, making it easier for vessels to swap identities and cargo with minimal oversight (Bloomberg coverage).
Data blackout: Bloomberg and Kpler analysts have documented a sharp increase in transponder shutdowns near eastern Malaysia since late 2023.
China’s Thirst for Cheap Oil—And How It’s Outmaneuvering the West
Despite official Chinese import data showing little to no Iranian crude since 2022, third-party analytics and satellite imaging tell a very different story.
Chinese independents (the “teapots”) are the main buyers, drawn by the heavy discounts—sometimes $10–15/bbl below market (Reuters).
Robust flows: According to Kpler, China imported an estimated 1.46 million barrels/day of Iranian crude in May 2025, rebounding from a recent dip. See the monthly import chart here.
Zombie ships: Some tankers use the identities of scrapped ships to further evade detection, a tactic now seen in other “sanctions busting” trades as well (FT analysis).
Manual tracking: Analysts are increasingly forced to match satellite images of “dark” ships with port records—an error-prone and labor-intensive process, as explained by Vortexa and Kpler.
The Geopolitical Stakes: U.S. Leverage Weakens, China Gains
This clandestine oil flow isn’t just a numbers game—it has deep strategic implications:
Undermining US leverage: Every sanctioned barrel that reaches China softens the blow of Western sanctions—while simultaneously propping up Tehran’s budget and regional influence (WSJ report).
OPEC+ tension: As Iran moves product “off the books,” it complicates both OPEC+ production policy and global price discovery (Al Jazeera background).
Maritime risk: The use of untracked vessels and nighttime STS transfers raises the risk of collisions, spills, and insurance gaps in the world’s busiest shipping lanes.
Why This Story Matters: The Future of Sanctions Is Being Written at Sea
The continued rise of the shadow fleet and Malaysia’s emergence as a central node exposes two critical realities:
Sanctions are leaking—badly: Even with advanced tech, Western powers can’t stem the tide without global maritime cooperation (and so far, Malaysia isn’t playing ball).
China’s energy security trumps politics: With razor-thin refining margins and relentless demand, China will keep exploiting these gray-market flows—reshaping the global energy map.