OFAC Imposes Iranian Sanctions as Part of Maximum Pressure Campaign

On February 24, 2025, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”), and the US Department of State imposed sanctions on dozens of persons and oil tankers across Iran, China, India, the United Arab Emirates, and other jurisdictions pursuant to Executive Orders (“E.O.”) 13902 and 13846. The action stems from the growing interest by the new Trump administration’s maximum pressure campaign to target the export of Iranian oil. Following the action we reported on earlier this month, this is the second round of sanctions targeting Iranian oil since the President issued National Security Presidential Memorandum 2 on February 4, 2025. That memorandum calls for the US to “drive Iran’s export of oil to zero.”

Treasury Secretary Scott Bessent provided remarks on the action, stating “Iran continues to rely on a shadowy network of vessels, shippers, and brokers to facilitate its oil sales and fund its destabilizing activities, [and] . . . The United States will use all our available tools to target all aspects of Iran’s oil supply chain, and anyone who deals in Iranian oil exposes themselves to significant sanctions risk.”

Sanctioned Actors and Assets

We will now provide an overview of the key actors and assets that were targeted as a result of OFAC’s February 24, 2025 action. For additional details on the specific entities and vessels sanctioned and identified, please see OFAC’s press release.

Overseers of Iranian Oil Exports

OFAC designated Iran’s Deputy Minister of Petroleum, who also serves as the chief executive officer of the National Iranian Oil Company (“NIOC”), which is the company responsible for the exploration and production of oil and petroleum products in Iran. NIOC’s proxy group includes the Islamic Revolutionary Guard Corps-Qods Force and other Iranian military groups that have been targeted by OFAC action in the past. The Deputy Minister was designated pursuant to E.O. 13902 and NIOC was designated pursuant to the counterterrorism authority of E.O. 13224. OFAC also designated NIOC’s subsidiary that oversees all operations at Iran’s oil terminals and key managers of that subsidiary and those terminals pursuant to E.O. 13902.

Oil Brokers

OFAC also designated numerous oil brokers outside of Iran that facilitate the sale and transport of crude oil to end users abroad. Specifically, the action targeted UAE and Hong-Kong based oil brokers that were using vessels flagged in Barbados, Cook Islands, and Panama to purchase tens of million of dollars’ worth of petroleum products from NIOC. The oil brokers, and managers of the respective vessels involved, were designated pursuant to E.O. 13902 for operating in the petroleum sector of the Iranian economy. Further, two of the vessels involved were also identified by the State Department as blocked property on February 24, 2025, and another was identified pursuant to E.O. 13902 as property in which one of the now designated vessel managers has an interest.

Shadow Fleet

OFAC also targeted additional actors involved in the shadow fleet. The “shadow” fleet (also referred to as the “ghost,” “dark,” or “parallel” fleet) generally refers to older vessels that are anonymously owned and/or have opaque corporate structures that are solely deployed in the trade of sanctioned oil or oil products and engage in various deceptive shipping practices. OFAC designated two companies involved in ship-to-ship transfers outside of jurisdictional port limits with non-sanctioned vessels to transport petroleum to foreign customers, obfuscating the oil’s Iranian origin. The companies were designated pursuant to E.O. 13902 and the respective vessels were identified as property in which those designated companies have an interest pursuant to E.O. 13846.

State Department Designations

In conjunction with OFAC’s action, the US Department of State designated eight entities based in Iran, India, Malaysia, Seychelles, and the UAE for their involvement in the sale, purchase, and transportation of Iranian petroleum. Further, eight vessels were also identified as blocked property in which these entities have an interest pursuant to E.O. 13846.

Notable Trends

Earlier this month, Treasury Secretary Scott Bessent emphasized that the US aims to squeeze Iran’s oil exports to less than 10% of the current levels, as the new Trump administration renews a campaign of “maximum pressure” on Tehran’s nuclear program.

The impacts of the maximum pressure campaign has had immediate effects on Iranian oil exports according to crude oil analysts.^[1] The number of actors willing to take high-risk Iranian sanctioned oil is dropping as a result of OFAC’s recent actions, along with increased competition with Russia, which attracts oil takers with higher freight rates and corresponding profit margins. According to those analysts, since the fourth quarter of 2024, approximately 80 Iran-linked tankers were targeted and there has been a notable decline overall of Iranian crude exports. Shipments have reportedly dropped to about 1.5 million barrels a day in February 2025, from 1.76 million barrels a day in November 2024, with experts estimating that this trend will continue with Iranian oil exports falling by about a third from their current levels.

OFAC Designation Implications

As a result of OFAC’s designations, all property, and interests in property of the persons above that are in the United States or in the possession or control of US persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by US persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

* * *

We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.

[1] See Iran Oil Flows Seen Curbed by Rush for Unsanctioned Tankers - Bloomberg