A covert system of oil trade involving Iran, Russia and China has emerged, using offshore firms, naval mortgages and ship-to-ship transfers to bypass sanctions and deliver crude to Chinese buyers, reported Wyoming's Regtechtimes.

More than 30 tankers worth nearly US$1 billion were mortgaged between 2019 and 2023 under naval mortgage arrangements. These ships, registered in Panama, Hong Kong and the Marshall Islands, were later spotted loading crude directly from Iranian and Russian ports despite paperwork claiming Malaysian or Iraqi origin.

Analysts say the network uses weak oversight and offshore companies to mask ownership and cargo origin. Brokers can claim ships if buyers default, turning vessels into collateral for oil trades.

China, the world's largest oil importer, reportedly received 1.5 million barrels per day from Iran and two million from Russia last year. Much of this supply goes to independent "teapot" refineries that operate outside major state-owned systems.

Investigations found tankers registered under firms with Chinese directors who appeared unaware of their ownership. At least eight companies shared a phone number linked to individuals sanctioned by the US in 2019 for moving Iranian oil.

In one case, the tanker Skadi loaded Russian Urals crude in Primorsk and transferred it at sea to An Shun II, which later delivered the cargo to China. Ship tracking confirmed the route.

Front companies in offshore hubs act as owners of record, while brokers like Ocean Glory Giant facilitate transactions. The US and EU have sanctioned Iranian and Russian oil, but intermediaries continue to move cargo east.

Ships often "go dark" by switching off transponders during transfers. Once refined in China, the oil becomes nearly impossible to trace. Analysts estimate 130 million barrels worth US$9.6 billion were moved under these arrangements.

Beijing defends its imports, opposing "illegal unilateral sanctions" and asserting the legality of trade under international law. At least 20 ships involved have been sanctioned by the US, though some remain active.