Iran’s shadow fleet rakes in up to $800 million by mixing its oil with Iraq’s and selling that blend as legitimate crude, directly undermining U.S. sanctions and fueling terrorist proxies.
Story Highlights
- The US Treasury is sanctioning a UAE-based network led by Waleed al-Samarra’i for its sophisticated oil blending operations generating hundreds of millions of dollars for Iran.
- Smugglers use ship-to-ship transfers, AIS spoofing, false documents and bribes to Iraqi officials to disguise Iranian crude as Iraqi.
- Chinese imports of “Iraqi” oil exceed actual exports by 100,000 barrels per day, reflecting a $2.5 billion-a-year tax avoidance scheme.
- These operations fund Iran’s IRGC and regional militias, exposing corruption and weakening U.S. energy security efforts.
- Despite the repression, the networks persist, highlighting the limits of sanctions against determined adversaries.
US Treasury Targets Iran’s Oil Blending Network
The US Treasury’s Office of Foreign Assets Control sanctioned Babylon Navigation DMCC and its director, Iraqi-Kittiti businessman Waleed Khaled Hameed al-Samarra’i. This UAE-based group mixes Iranian crude with Iraqi oil via ship-to-ship transfers near the Iraq-Iran border. They market the blend as purely Iraqi crude, avoiding U.S. sanctions imposed since 2018. The operations generate at least $300 million a year for Iran, according to conservative estimates. Tactics include spoofing AIS at Iraqi ports like Khor al Zubair and nighttime activities to avoid detection.
Techniques and key players exposed
Al-Samarra’i’s network operates vessels such as ADENA and LILIANA, flying the Liberian flag. They rely on fake documents and bribes paid to anonymous Iraqi officials for authentication. A parallel network led by Iraqi-British Salim Ahmed Said has used VS Tankers FZE, formerly Al-Iraqia Shipping, to trade Iranian oil via Iraqi pipelines since 2020. In April 2024, VS Tankers carried out transfers with the sanctioned Iranian tanker CASINOVA. Iraqi Oil Minister Hayan Abdel-Ghani confirmed that Iranian oil tankers were using false Iraqi papers seized during recent inspections.
Timeline of escape and American response
Smuggling intensified after the United States withdrew from the JCPOA in 2018, with Iran building a shadow fleet of aging tankers. In 2019, ship-to-ship transfers became commonplace in the Persian Gulf. On July 3, 2025, sanctions were imposed on Said’s group; In December 2025, reports emerged of al-Samarra’i as the “next frontier”. Recent Treasury actions, post-December 2025, have hit Babylon entities. Despite this, discrepancies persist: China imports 100,000 barrels of “Iraqi” oil per day more than Iraqi exports, which is equivalent to $2.5 billion per year.
Wider impacts on security and the economy
These schemes undermine U.S. sanctions, funneling funds to Iran’s IRGC and proxy militias that destabilize the region. Iraq is under scrutiny over port complicity, straining ties with Washington. In the short term, the sanctions disrupt $300 million in revenue and increase transportation risks from unsafe transfers. In the long term, Iran adapts with new tactics, allowing an escape of $1 billion to $2.5 billion. Gulf oil companies now avoid Iraqi waters due to collision risks and compliance requirements. It shows how global elites and corrupt officials prioritize profits over stability, frustrating Americans on both sides who demand accountability from a bloated federal system more focused on elite interests than energy security and borders.
Expert opinions and ongoing challenges
Tanker trackers highlight data gaps related to AIS manipulation as detectable red flags. GTR calls the mixing of the sea and the terminal an “unusual development.” Lloyd’s List calls Iraqi ports a hot spot for AIS spoofing. The Treasury considers the operations as revenue streams activated by the IRGC. Iraq denies systemic corruption, blaming dishonest traders, but confirms counterfeits. No complete shutdown occurred; The Ghost Fleets are growing with over nine active Babylon ships. During Trump’s second term, under Republican Party control, there has been renewed pressure to dismantle these networks, but evasive tactics are evolving, underscoring the state’s deep failures in enforcing accountability abroad.
Sources:
US Treasury Press Release on Sanctions
GTR: the next frontier of Iranian oil smuggling
The new Arabic: Iranian oil tankers use false Iraqi documents
OilPrice.com: US Sanctions Network Transports Iranian Oil
PortNews: Treasury Sanctions on Iranian Oil Network
Lloyd’s List: US crackdown on Iran-Iraq oil mix
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