Everyone knows: Both Iran and China, but also the USA: despite the existing sanctions against Iran, oil is exported to China in record quantities “If you believe the Chinese government, the country does not import oil from Iran. Instead it imports a lot of crude oil from Malaysia. So much so that, according to official data from Chinese customs, the country imports more than double the amount of oil that Malaysia produces,” mineral wealth expert Javier Blas told the Bloomberg news portal.

According to the expert, a simple trick turns Iranian crude oil into Malaysian crude oil. He considers this to be “the easiest and cheapest way to circumvent American sanctions.” And so Malaysia last year became China’s fourth oil supplier, after Saudi Arabia, Russia and Iraq.

Iran has for many years used the United Arab Emirates as a hub to circumvent sanctions. Goods on the embargoed lists from the US or the EU often arrive in Iran via Dubai. The same applies to oil cargoes channeled to their consignees via the UAE.

Increases by 1000% sales of German cars in Russia

Of course, Russia also has such hubs. There is almost no product that cannot reach Russia through a third country despite sanctions, such as, for example, spare parts for German luxury cars or electronic components used in the remote control of weapons systems. Indicative that sales of German cars and spare parts increased in 2023 by almost 1,000%.

Since the EU imposed its 13th package of sanctions against Moscow on February 22, 2024 following its invasion of Ukraine, Russia has been the most sanctioned country in the world. The Russian government revised upward its forecast for this year’s economic growth from 2.3% to 2.8%. In fact, according to the IMF, growth will hover around 3.2%, because quite simply oil exports are the engine of the Russian economy.

Until the outbreak of the war in Ukraine, Iran was the most heavily sanctioned country in the world. After that, the US and the EU repeatedly imposed new sanctions. Russia is now subject to more than 5,000 different targeted sanctions, more than Iran, Venezuela, Myanmar and Cuba combined.

Only Security Council sanctions are binding

It should be noted that sanctions are binding under international law only when imposed by the UN Security Council. Consequently there are many major global players, such as India, Brazil and China, which do not apply these sanctions.

For Christian von Sest, a sanctions expert at the German Institute for Global and Regional Studies (GIGA), the sanctions have not led Russia and Iran to change their stance. At this stage, however, the USA and the EU are in the process of further tightening the sanctions. According to a report in the Wall Street Journal, the US is preparing sanctions against some Chinese banks in order to exclude them from the global financial system. The goal of US authorities is to stop Chinese banks acting as middlemen providing support for Russian defense production, the US financial newspaper reports, citing “people familiar with the matter”.

The pressures are also increasing in the case of the United Arab Emirates: “The UAE has become an important hub for circumventing Iranian and Russian sanctions,” states the American think tank Atlantic Council. For this reason the Financial Action Task Force (FATF), an international coordinating body set up by the G7, the EU and the OECD to combat money laundering, has included the UAE in the so-called gray list of countries. This list includes countries in which FATF investigators see an increased risk of money laundering and terrorist financing.

Editor: Stefanos Georgakopoulos