Iran's Revolutionary Guards Strengthen Control Over Oil Industry

By Jonathan Saul and Parisa Hafezi
LONDON/DUBAI (Reuters) – Iran's Revolutionary Guards have tightened their grip on the country's oil industry, controlling up to half of the exports that generate significant revenue for Tehran and fund its regional proxies.

All aspects of the oil business are increasingly influenced by the Revolutionary Guards, from a shadow fleet of tankers secretly transporting sanctioned crude to logistics and front companies selling oil, primarily to China.

The degree of the Islamic Revolutionary Guard Corps' (IRGC) control over oil exports has not been previously disclosed. Despite stringent Western sanctions imposed by former U.S. President Donald Trump in 2018, Iran reportedly generates over $50 billion annually in oil revenue, its primary source of foreign currency.

Experts estimate that the Guards control up to 50% of Iran's oil exports, a notable rise from about 20% three years ago. Three estimates relied on intelligence documents regarding Iranian shipping, while the others monitored shipping activities linked to the IRGC. However, Reuters could not determine the exact extent of control.

The IRGC's increasing dominance in the oil sector complicates the effectiveness of Western sanctions, as the organization is designated a terrorist group by the U.S.

Trump’s potential return to the White House could lead to stricter enforcement of sanctions. Iran's oil minister indicated that the government is implementing measures to counter any restrictions without disclosing specifics.

As the Guards expand, they challenge state institutions like the National Iranian Oil Company (NIOC) and its NICO trading subsidiary. Richard Nephew, a former U.S. State Department special envoy for Iran, noted that NIOC officials lacked expertise in evading sanctions, while IRGC operators excelled at smuggling oil, thus increasing their control.

The IRGC, a powerful political and military force, maintains close ties with Supreme Leader Ayatollah Ali Khamenei. They provide support to regional groups such as Hezbollah and Hamas, despite ongoing Israeli operations against IRGC commanders.

Iran began allocating oil to the IRGC and Quds Force around 2013 due to budgetary constraints from sanctions. The Guards effectively sold oil even under pressure, as revealed by Nephew's experience in tracking Iranian oil activities at that time.

In 2023, Iranian oil revenues reached $53 billion, slightly down from $54 billion in 2022, as rising output surpassed 3.3 million barrels per day, according to OPEC. China remains the largest buyer of Iranian oil.

Front companies, such as China-based Haokun, facilitate these sales, continuing operations despite sanctions. Stories of both unintentional entanglement of Western banks in Iranian transactions raise concerns about undetected involvement.

The IRGC markets oil allocated by the Iranian government, with revenues split between the IRGC and NICO, where the IRGC typically sells oil at a discount due to perceived risks.

Revenues from oil sales are used to fund IRGC operations, including support to Hezbollah, estimated between $700 million and $1 billion annually. The exact distribution remains unclear, with Iran’s primary tanker operator, NITC, assisting in shipping operations that obscure oil origins.

Sanctions have targeted tankers transporting oil for the Quds Force, indicating ongoing international efforts to curb IRGC activities.

Summary: Iran's Revolutionary Guards control up to 50% of the nation's oil exports, increasing their influence amid stringent sanctions and significant revenue generation despite restrictions.