On the menu today: A deep dive into the Trump administration’s decision to lift sanctions on 140 million barrels of oil from Iran currently at sea. You don’t see countries lift sanctions on enemies when they’re at war very often.
A Sanctions 180
In February 2025, President Trump announced his campaign of “maximum pressure” on Iran, including orders to “implement a robust and continual campaign, in coordination with the Secretary of the Treasury and other relevant executive departments or agencies (agencies), to drive Iran’s export of oil to zero, including exports of Iranian crude to the People’s Republic of China.”
Back in November, the U.S. Treasury Department announced new sanctions on a network of front companies and shipping facilitators that bankroll the Iranian armed forces by selling crude oil.
“Today’s action continues Treasury’s campaign to cut off funding for the Iranian regime’s development of nuclear weapons and support of terrorist proxies,” said Secretary of the Treasury Scott Bessent. “Disrupting the Iranian regime’s revenue is critical to helping curb its nuclear ambitions.”
Then the U.S.-Israeli war against Iran began, the Iranians fired drones and missiles at oil tankers and port facilities and refineries, and deployed at least a few mines. Oil prices jumped from about $58 per barrel to between $90 and $98 per barrel, and gas prices in the U.S. started to rise dramatically.
And then Friday, the Treasury Department abruptly changed direction:
Today, the Department of the Treasury is issuing a narrowly tailored, short-term authorization permitting the sale of Iranian oil currently stranded at sea. At present, sanctioned Iranian oil is being hoarded by China on the cheap. By temporarily unlocking this existing supply for the world, the United States will quickly bring approximately 140 million barrels of oil to global markets, expanding the amount of worldwide energy and helping to relieve the temporary pressures on supply caused by Iran. In essence, we will be using the Iranian barrels against Tehran to keep the price down as we continue Operation Epic Fury.
The world uses about 102 million barrels of oil per day, so un-sanctioning the 140 million barrels at sea was unlikely to make a dramatic or lasting change in oil prices. But, at least in theory, every little bit of additional supply on the market helps.
Bessent laid out the arguments for this policy change on Meet the Press Sunday:
Again, Kristen, why don’t we have good facts here? That Iranian oil was always going to be sold to the Chinese. It was going to be sold at a discount. So which is better, Kristen? The uh, which is better? If oil prices spike to $150 and they were getting 70 percent of that? Or oil prices below $100? It’s better to have them where they are now. And to be clear, we had always planned for this contingency. About 140 million barrels are out on the water. In essence, we are jujitsuing the Iranians. We are using their own oil against them. We have a much better line of sight, to be clear, at Treasury, when this oil goes to — if it goes to Indonesia, if it goes to Japan, if it goes to Korea, we have a much better line of sight and are able to block accounts that the oil goes into. When it goes into China it completely gets recycled. So, to be clear, that 14 billion number is grossly overstated. . . .
At Treasury, we plan for all contingencies. We have break-the-glass plans. And to be able — this water — this oil is floating out in Asia, and it is mostly our Asian allies — the U.S. gets virtually no oil from the Gulf. We are energy sufficient. So, when we un-sanction this, rather than the oil going to China, it can go to Japan. It can go to Korea. It can go to Indonesia. It can go to Malaysia—
140 million barrels — about 20 million barrels a day — comes out of the Gulf. About 5 million has been . . . repurposed by the Saudis, by the UAE. So, we’re at a 15 deficit. About 1.5 is Iranian oil that comes out. So, we are at between a 10 and 14 million deficit on a daily basis. So if you think about 140 million barrels, that’s between ten days and two weeks of supply.
Our Andy McCarthy was among those who doubted the “jujitsuing” at work:
The high likelihood is that the 140 million barrels are going to China, not the market.
Of course, oil is fungible, so the idea is that every barrel China gets from Iran is another barrel available to other buyers on the open market since China doesn’t need to buy it. This is the apparent theory behind Bessent’s claim that, rather than allowing China to “hoard” Iranian oil “on the cheap”, the lifting of sanctions will have the effect of “unlocking this existing supply [of 140 million barrels] for the world” through global markets.
In practice, however, China is stockpiling oil. Hence, paying Iran for another 140 million barrels for its reserves (its storage capacity for which is vast) will not change China’s market behavior; ergo, the administration’s move is unlikely to relieve global consumption or otherwise change market conditions.
China is indeed stockpiling oil; as of 2025, they had the world’s biggest reserves and had built, and continue to build, new storage tanks.
Are the tankers carrying these 140 million barrels diverting to other Asian countries? As of this writing, we have no public reports confirming that. However, we have seen oil tankers carrying Russian oil divert from China to India in the aftermath of the Treasury Department’s lifting of sanctions on their cargo: “At least seven tankers carrying Russian oil have switched their destinations mid-voyage from China to India, according to Vortexa Ltd., with all of India’s major refiners now in the market for the country’s crude.”
The price of crude oil futures, however, has not come down significantly since Friday’s announcement, nor has Brent crude futures, unless you want to count going from $111 per barrel to about $102. Before the war, it was around $61 per barrel. There was a sudden drop after Trump’s Truth Social post, but they bounced back up a short time later.
Keep in mind, as of March 18, Iran had set up a system to effectively charge a toll to get through the Strait of Hormuz unmolested. Lloyd’s List reports, “Iran has created a de facto ‘safe’ shipping corridor through its territorial waters in the Strait of Hormuz, offering vetted vessels passage in exchange for approval — and in at least one case, a reported $2 million payment.”
That’s separate from the additional money that is going to Iran because of the higher price of oil . . . which is now past $8 billion according to the Kpler Institute’s calculations:
The $47 increase in oil prices per barrel during the recent war generated a potential profit of $8.7 billion from Iran’s oil sales, according to Kepler Institute.
According to the available data, the current volume of Iranian oil (both on sea and in transit) has reached about 187 million barrels, a figure which is equivalent to about one and a half day of the global consumption.
Concurrent with the recent war developments, the oil price difference has increased to around $47 compared to the pre-war period.
Estimates indicate that Iran has potentially gained around $8.7 billion in profits from the increase in price of this amount of oil.
It was entirely right for conservatives to object to the Obama administration sending $1.7 billion in cash to the Iranian regime as part of a deal with Iran. But if you don’t like sending $1.7 billion in cash to the mullahs, you shouldn’t shrug at the consequences of the war that end up putting more money into the hands of the regime.
This war to eradicate Iran’s ability to threaten its neighbors and our allies . . . has resulted in Iran demonstrating its ability to threaten its neighbors and our allies, and its considerable leverage over the world’s energy markets. The Iranian regime is getting its tail kicked militarily but is showing it still has cards to play economically and geopolitically.
The economic consequences of the war are piling up; Lloyd’s List columnist Richard Meade warns:
What happens next is far from clear, but even the best-case scenarios now contain an assumption that shipping will take months to return to some semblance of normalised trading patterns even after the fighting stops.
At that point, security is going to be required and given that the US has made it clear that will be a responsibility for others to take on, the limited diplomatic discussions are starting to focus on what that looks like.
Congress may not have voted on an authorization of military force for this war, but they will be required to vote on paying for it; the Pentagon is seeking roughly $200 billion to sustain its war in Iran. A number of different figures are being thrown around, but the war is costing the U.S. government roughly $1 billion per day. If the war ends up toppling the regime and driving the mullahs from power, it will look like money well spent.
If, as Politico reported, the Trump administration is in talks with Iranian parliament speaker Mohammad Bagher Ghalibaf to take over, people will fairly ask what the point of this endeavor was if we’re just going to leave another Islamist hardliner in power. (For what it’s worth, Ghalibaf says there have been no talks, the U.S. must suffer “complete and humiliating punishment” and pay Iran reparations.)
Some people will dismiss the above as “panican” or “nattering nabobs” or doomsaying. But what’s happening around the world is what’s happening; world events don’t really care whether you like them or not.
ADDENDUM: Over in that other Washington publication, I disappoint Trump’s opponents by observing that there is no discernible “MAGA crackup” over the Iran war, but part of that is because for most Americans, “Do you identify as MAGA?” and “Do you support the president?” are essentially the same question. If you’re a Trump supporter who is upset or wary about the Iran war or the resulting impact on gas prices . . . maybe you’re not as inclined to identify as MAGA to a pollster lately.