Sanctions without shock? United Nations snapback and Iran's oil exports

By Nikolay Kozhanov, Associate research professor, Gulf Studies Center, Qatar University

Editor’s introduction

In September 2022, the death of Mahsa Jina Amini marked a major turning point for Iran. The event sparked lengthy nationwide protests across socio-economic classes and population groups whose demands rapidly evolved from discarding controversial hijab regulations to calls for the overthrow of the Islamic Republic. The Iranian government responded with repression, killing over 400 protesters in late 2022 and early 2023, according to human rights groups. Today’s protests of early 2026 both reflect and reinforce the negative spiral of government underperformance, growing external and internal pressures as well as risks, and declining legitimacy that also characterized the protests of 2022/2023.

The Clingendael blog series ‘Iran in transition‘ explores power dynamics in four critical dimensions that have shaped the country’s transformation since: state-society relations, intra-elite dynamics, the economy, and foreign relations. This blog post examines the likely effect of UN snapback sanctions on Iran’s oil exports, which generate revenues that are crucial to regime maintenance. 

27 September 2025: Sanction snapback

In late 2025, the UN Security Council (SC) reimposed sanctions on Iran through the snapback mechanism laid out in UN SC Resolution 2231 (2015). This move effectively restored a set of punitive economic restrictions that had been lifted under the 2015 Joint Comprehensive Plan of Action (JCPOA) targeting Iran’s arms imports, financial sector, shipping activities, and other key areas. Britain, France, and Germany triggered the mechanism. This step added another layer of economic pressure on top of already existing extensive Western sanctions, including long-standing restrictions on, for example, Iran’s oil industry. All these measures aim to pressure the country into compliance with the Non-Proliferation Treaty. Yet, the real impact of the snapback sanctions on Iran’s oil exports remains to be seen. 

Oil exports move deeper into the shadows of evasion

The main issue at stake is that US and EU sanctions predating the 27 September 2025 snapback had already rendered Iran’s formal oil trade marginal. Hence, UN sanctions that target official trade have limited potential to make Iran’s economic situation worse in this area. Its exports (oil and otherwise) had already shifted nearly entirely to covert channels that consist of a complex and opaque network of intermediaries, stealth tankers and intermediary ports connecting Iran with its major consumer of oil: China (90% of exports). 

Iran’s oil sanctions evasion scheme started long ago as a set of improvised and ad-hoc logistical practices but matured over the years into a full-fledged ‘dark’ supply chain that is difficult to disrupt. For instance, Iran-to-China oil exports often involve at least one ship-to-ship transfer, typically in “grey zones” near Malaysia or the Gulf of Oman, a tactic that makes tracing the oil’s origin far more difficult. Over time, Iran and its partners have optimized these operations: tanker voyages that averaged 85–90 days in 2022 (with long detours and idle times to avoid detection) have been streamlined to about 50–70 days by late 2025. This indicates that Iran’s shadow fleet has become more efficient and coordinated. Renewed UN sanctions are likely to push Iran’s oil trade even deeper into the shadows but will not fatally disrupt it. 

Sanctions do raise the cost of oil exports

Yet, the snapback sanctions are not completely toothless as they also target oil-adjacent sectors like finance, insurance, and shipping logistics. Consequently, the snapback’s real bite is in raising the operational costs and risks of exporting each barrel of Iranian oil. With UN sanctions restored, entities worldwide now face clearer legal prohibitions on facilitating Iran’s oil trade due to, for example, a ban on insuring Iranian tankers, restrictions on port access and prohibiting financial services like banking to oil-related transactions. This may deter more risk-averse shippers or financiers and force Iran’s network to become even more self-reliant. Iran, in turn, will have to increase risk premium payments by further discounting the sales price of its oil to keep it attractive on the black market. Tehran had already been selling its oil at a discount. In the late 2025, such discounts increased from $3–6 per barrel to $8–$10 (relative to Brent crude oil). The snapback sanctions may ultimately decrease Iran’s oil income, which still amount to more than a quarter  of the government’s budget. In turn, this could compel the government to cut social programs like fuel subsidies that also help maintain the loyalty of parts of the population. 

But oil export revenues are there to stay 

Nevertheless, it is not necessarily the price but rather the volume of Iran’s oil exports that matters. After all, lower prices can be partly – but not completely - compensated for by exporting more oil. Despite a decade of on-and-off sanctions, Iran has shown remarkable resilience in raising and maintaining the volume of its oil exports in the past few years. This trend is likely to continue even with the UN snapback in place. While the US withdrawal from the nuclear deal (JCPOA) in 2018 and the re-imposition of the US sanctions caused Iran’s oil exports to drop to just 444,000 barrels per day (bpd) in 2020 (from over 2 million bpd in 2017), they have steadily climbed back up by exploiting sanctions loopholes and developing or deepening sales and delivery channels that evade sanctions. By 2024, Iran’s crude oil exports averaged around 1.5 million bpd, and in 2025 they edged up to about 1.6 million bpd. Some reports even indicate brief peaks above 1.8 million bpd in early 2025, the highest since 2018, as Iran rushed out cargoes ahead of anticipated new restrictions. This recovery of oil export volumes has provided Tehran with vital income, albeit at discounted prices, and has ensured oil exports continue to contribute roughly a quarter of Iran’s GDP (2024). The snapback sanctions will add compliance hassles and legal risk, but the costs hereof can largely be compensated by increasing export volumes. Pushing these volumes to below 1 million bpd requires other measures, in particular targeting China.  

China as key source of revenue

To begin with, for sanctions pressure to become truly effective, China would have to lose its strategic and commercial interest in Iran as a source of hydrocarbons. At present, China is the indispensable lifeline for Iran’s oil exports as it purchases the bulk of sanctioned crude through indirect and opaque channels. Iranian oil is primarily delivered to China’s small and formally independent refineries (so-called “teapots”) that thrive on heavily discounted grades. These refineries have limited exposure to U.S. financial instruments, rely minimally on dollar financing, and are structurally insulated from Western regulatory pressure. This makes them well suited as end-buyers of sanctioned oil. At the same time, it is also important to keep in mind that the teapot refineries are only formally independent. They operate under tight Chinese state control through import quotas, regulation, and infrastructure access, making them politically dependent and strategically instrumental rather than autonomous market actors. This duality gives Beijing plausible deniability and flexibility, but leaves Tehran structurally vulnerable because volumes, prices, and continuity can be tightened or expanded at will by Chinese state control over quotas and regulation.

Yet, Beijing has so far effectively rejected compliance with enforcement mechanisms tied to international legal frameworks, such as the UN snapback sanctions, framing them as politically motivated and inconsistent with its own interpretation of international obligations. In consequence, China’s domestic economic trajectory—especially the pace of its industrial growth, refining margins, and dynamic oil demand—matters far more for Iran’s export prospects than any renewed UN sanctions. As long as Chinese oil consumption remains steady or growing, and teapot refineries continue to operate profitably on discounted feedstock, Iran retains a viable outlet for its crude. In this manner, sanctions become less of a binding constraint on Iran and act more as a variable in China’s broader calculus of energy security, economic pragmatism, and strategic rivalry with the United States.

Zooming in on this last point, it needs to be considered that intensifying US–China strategic rivalry also reduces the effectiveness of UN sanctions snapback. This is because such rivalry has pushed Beijing to diversify its oil import portfolio even further, away from suppliers that are closely aligned with Washington. In fact, Russia and Iran are increasingly perceived in Beijing as politically more reliable long-term hydrocarbon partners than GCC producers, many of whom remain embedded within US-led security and financial architectures. While Gulf oil remains commercially attractive and will likely continue to account for a substantial part of Chinese oil purchases, especially Saudi Arabia and Iraq, Beijing is acutely aware of the geopolitical risks associated with over-reliance on suppliers vulnerable to US diplomatic pressure or potential export constraints. Iranian crude, despite sanctions, offers Beijing discounted barrels, flexible contractual terms, and strategic leverage in its broader contest with the United States. As a result, sanction pressure on Iran paradoxically reinforces its role in China’s energy security strategy, even if it is mostly supplemental at present.

Global oil market volatility as blessing in disguise

The volatility that is at times characteristic for the global oil market also plays an indirect but important stabilising role for Iran’s exports. As the case of Russia demonstrated after 2022, the comprehensive removal of a major producer from global markets amplifies price volatility, disrupts supply chains, and generates inflationary pressures that ultimately harm the global economy and key state consumers. Hence, increased efforts to comprehensively enforce a ban on Iranian oil sales would introduce another layer of instability into an already fragile market environment that is shaped by geopolitical conflicts, OPEC+ policy uncertainty, and underinvestment in upstream capacity. Consequently, neither the United States (it still imports oil despite shale) nor the European Union has a strong structural interest in pushing Iranian exports to zero as this can have negative impact on market stability, although they do seek to cap, manage, and politicize Iranian exports to limit revenue growth and preserve sanction leverage. Unsurprisingly, periods of relative market tightness often encourage greater tacit tolerance of Iranian exports while moments of market stability invite more assertive enforcement actions against China and intermediaries purchasing Iranian crude. 

What really matters

Given the preceding reflections, the most serious threat to Iran’s oil export capacity are not the snapback sanctions per se, but rather the mixture of structural constraints within Iran’s own oil sector and the accumulated effect of sanctions that had already been adopted between 2018 and 2025. The ageing of major oil fields, chronic underinvestment, and Tehran’s limited access to advanced technologies, equipment, and international financing - largely the result of sanctions that were already in place - pose greater long-term risks to production volumes. Enhanced recovery techniques, field redevelopment, and offshore expansion all require capital and expertise that Iran has struggled to secure under prolonged sanctions. From this perspective, the snapback sanctions mostly provide a political signal that reasserts and firms up existing limitations from an international legal point of view, including sanctions that already banned Iran from access to new equipment and technologies. 

Snapback is a challenge, but not a threat

All in all, the UN snapback sanctions of 27 September 2025 are unlikely to be a game-changer in reducing Iran’s oil exports. Instead, they serve as a cost-raising and risk-intensifying factor that comes on top of an already highly restrictive unilateral sanctions environment. The snapback will further institutionalise Iran’s reliance on shadow logistics, discount pricing, and oil trade with China. By itself, it is unlikely to fundamentally reverse the recovery of Iran’s export volumes after 2020.

In the short term (6–12 months), Iran will probably maintain its crude exports in the 1.3–1.6 million bpd range, albeit at deeper discounts and with higher transaction costs as its shadow logistics and China-centric trade networks adapt to the tighter legal environment. Any volatility is more likely to manifest in revenue rather than physical volumes with Tehran simply absorbing losses via price discounts, delayed payments, and an increased reliance on non-cash settlement mechanisms.

In the medium term (2–5 years), the outlook becomes more constrained although this will not be so much due to the snapback. Unless a convergence of negative external shocks occurs - most important among those would be a sharp slowdown in Chinese oil demand, a policy shift in Beijing toward stricter enforcement, or an unusually prolonged period of global market oversupply - snapback sanctions by themselves are unlikely to push Iranian exports sustainably below 1 million bpd. 

Instead, Iran’s export capacity will increasingly be shaped by the cumulative effects of US and EU unilateral sanctions interacting with Iran’s own structural weaknesses, including declining reservoir productivity, the absence of enhanced oil recovery investments, equipment degradation, and the gradual cannibalisation of existing infrastructure.

Under these conditions, Iran is likely to remain present in global oil markets, but as a structurally weakened, high-discount supplier, progressively trading stable volumes for lower per-unit-revenue. In a sense, the slow-burning negative spiral of Iran’s oil sector mirrors the general and gradual decline of overall regime performance and stability, as the intensity and persistence of domestic protests lays bare.

Read earlier blogs in this series