Iranian oil sales to China are persisting through maritime operations in international waters off Malaysia’s coast, according to satellite tracking data and maritime security analysts. The Eastern Outer Port Limits area, a 1,200-square-kilometre expanse in the South China Sea approximately 70 kilometers from Malaysia’s shore, has long functioned as an unofficial hub for transferring sanctioned petroleum from Iran, Russia, and Venezuela. Recent observations show Iranian tankers regularly disabling their tracking systems in this zone to conduct ship-to-ship cargo transfers, with the oil ultimately destined for Chinese markets.
China’s independent refineries, often called “teapot” operations, have become the primary purchasers of Iranian crude, accounting for roughly 90 percent of Iran’s oil exports historically. These smaller refineries face less exposure to US financial systems than state-owned competitors, making them willing buyers of discounted sanctioned oil. Multiple ship-to-ship transfers conducted in international waters help obscure the cargo’s origins before it reaches Chinese ports. Maritime security experts estimate that on any given day, approximately 200 vessels may be anchored in the EOPL, with roughly half potentially connected to Iranian operations.
Malaysia has recently moved to tighten regulations governing the area. In June, the country amended its Exclusive Economic Zone Act to restrict illegal anchoring, resupplying, and cargo transfers without government authorization. However, the area’s remoteness and jurisdictional complexities have historically made enforcement challenging. Malaysia’s Maritime Enforcement Agency has acknowledged difficulties in patrolling the expanse due to its location outside Malaysian territorial waters but within its economic zone.
Despite US naval blockades operating from April through June and resuming in July, and despite American sanctions targeting Chinese refineries and oil tankers, petroleum movements through the EOPL have continued throughout the conflict period. Chinese customs data inconsistencies suggest significant unreported Iranian oil imports, with Malaysia’s reported crude exports to China at times exceeding its total production capacity. China maintains that US sanctions lack international legal authority and has blocked Treasury enforcement actions, arguing they violate international law and lack UN authorization.
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