Inside the alleged IRGC Intelligence takeover of Iran’s sanctioned oil trade

Malek Hosseini, deputy minister for entrepreneurship and employment development, said Iran's economy contracted by 10 percent excluding oil and 4.6 percent including oil in the spring, citing official figures in an interview with labor-focused ILNA news agency.

According to two decades of Labor Ministry research, every one-percentage-point decline in economic growth corresponds to an average loss of 170,000 jobs, Hosseini said.

“If negative growth of seven to eight percent is recorded by the end of the year, around 1.2 million to 1.4 million people will have completely left the labor market” over the course of the year, he said.

The warning follows remarks by Ali Babaei Karnami, head of parliament's Social Affairs Committee, who said on October 23 that more than 1.7 million Iranian workers had lost their jobs since the start of the 12-day war.

Economist Ahmad Alavi told Iran International on October 18 that poverty, unemployment and declining purchasing power had existed before the war but had since worsened, attributing the country's economic difficulties to the Islamic Republic's policies.

More than one million leave insurance rolls

Around 1.15 million people were removed from Iran's compulsory social insurance rolls between March and August, although further analysis is needed to distinguish retirements, disabilities and new registrations, Hosseini said.

Another 300,000 people joined the unemployment benefits system by the end of August.

Iran's formal labor market recorded a net loss of approximately 500,000 workers during the Iranian year ending March 2026, according to Hosseini.

The official estimated that informal employment accounts for 54 percent of Iran's workforce, compared with 46 percent in formal employment.

“Our labor market suffers from chronic and structural problems,” Hosseini said, adding that the balance had shifted further toward informal and underemployed work since the war.

Government proposes jobs without insurance coverage

The Labor Ministry is developing a public employment program for unemployed people and informal workers affected by the economic crisis, offering short-term construction and service-sector work.

“There is absolutely no social security insurance under the public employment program,” Hosseini said.

Participants will also fall outside the protections of Iran's labor law, although existing employers and workers in registered businesses will remain subject to those regulations.

Hosseini said the ministry was working with the Central Bank to identify informal workers through banking transactions, distinguishing wage income from investment returns.

The official also warned that if raw materials are not adequately supplied, Iran's garment production and distribution chain could suffer losses equivalent to about 60 percent of its pre-war workforce, potentially affecting up to 750,000 jobs.

Workers, retirees and employees across Iran have repeatedly staged protests in recent months over low wages, unpaid salaries, rising living costs, dismissals and job insecurity.

The responses followed Bessent's interview with Iran International, in which he urged Iranians to prepare for severe fuel shortages and forecast a contraction of more than 25 percent in the country's economy in the year ending March 2027.

“My advice to the Iranian people would be: don't pay your taxes because you're not going to get anything back from the government,” Bessent told Iran International's Kambiz Tavana on Monday.

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  Bessent says Iran economy will contract by more than 25%

Bessent also urged households to stock up on heating fuel and fill their gasoline tanks, warning that Washington's Operation Economic Outcast would intensify over the next eight weeks.

The interview prompted a discussion among Iranians commenting on Iran International's Instagram post, with responses ranging from support for economic noncooperation to questions about how individuals could implement the recommendations.

Tax boycott prompts questions over implementation

Several commenters pointed out that income taxes are deducted automatically from salaries, leaving employees with little control over whether they pay them.

“We don't voluntarily pay taxes; they take them from us. Other deductions are made too, and whatever salary remains is paid late,” one commenter wrote.

Others noted that taxes are also included in the prices of goods and services, making them difficult to avoid through individual action.

“To avoid paying taxes, we'd have to stop eating because they're built into essentials. We'd starve if we didn't pay. And what fuel are we supposed to store, and how?” another wrote.

Some business owners and other respondents raised concerns about the consequences of withholding taxes, including potential restrictions on bank accounts and payment terminals.

“If you fail to pay taxes, your card terminal and bank accounts can be blocked. A shopkeeper's livelihood depends on them. We know this route; if it worked, we'd have tried it. Why not listen to people about practical solutions?”

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  US crackdown leaves much of Iran’s shadow banking untouched

Others questioned how much a boycott of individual tax payments would affect the Islamic Republic's finances.

Fuel recommendations draw questions

Bessent's recommendation to stockpile gasoline and heating fuel also generated discussion about household infrastructure, storage capacity and costs.

Several commenters noted that many Iranian homes use piped natural gas for heating and hot water, rather than fuel that can easily be stored.

“Where am I supposed to store fuel? I live in a 74-square-metre apartment with no balcony or storage. There's barely room for me. Even if I had fuel, how would I use it in my gas heating system?”

Another asked how households could prepare for shortages of piped gas or gasoline.

“How exactly should we stockpile fuel? How can we store the piped gas supplied to our homes, or gasoline for our cars?”

Financial considerations were another recurring theme, with some respondents describing difficulties setting aside money for additional supplies.

“A week after my salary arrives, only a small portion remains in my account, and I have to live on that until the end of the month. How am I supposed to stockpile fuel?” one wrote.

Others responded with humor, including suggestions about filling balloons with gas or storing kerosene in apartments.

Some urge collective action against the Islamic Republic

Not all responses focused on the practical challenges. Some supported Bessent's broader message, arguing that Iranians should take an active role in increasing economic pressure on the Islamic Republic.

“People of Iran, we should act too; we cannot expect the US to do everything. Let's start by not paying water, electricity and gas bills, and shopkeepers should withhold taxes.”

The suggestion also prompted questions about possible consequences, including the disconnection of essential services for nonpayment.

Others raised concerns about the wider impact of Washington's pressure campaign, including the possibility of military action and its consequences for civilians.

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  What Operation Economic Outcast means for Iran, and for everyone trading with

“Are Iranians supposed to do everything – take to the streets, risk their families and lives – only for the US to bomb Iran, divide its territory and take its oil? Ordinary Iranians would be worse off,” one commenter wrote.

Bessent said the US campaign was intended to pressure Iran's leadership rather than its population, forecasting further economic deterioration and serious fuel shortages this winter.

Bessent said Iran was running short of foreign currency, oil production was beginning to falter and the next eight weeks of Washington's Operation Economic Outcast would be “even more intense.”

“I would predict that from March of '26 until March of '27, the economy would contract more than 25 percent, which is more than the Soviet Union contracted after its collapse,” Bessent told Iran International’s Kambiz Tavana on Monday.

The Treasury secretary said the campaign was intended to pressure Iran's leadership rather than its population, while warning of severe fuel shortages this winter.

“My advice to the Iranian people would be: don't pay your taxes because you're not going to get anything back from the government,” Bessent said.

“You should start stocking up on heating fuel. There's going to be a big heating fuel shortage. In terms of gasoline, everyone should fill up their tanks now.”

Asked about the impact on ordinary Iranians, Bessent said humanitarian channels remained open for food and medicine, but the government was running out of dollars to pay for imports.

He also said authorities were printing money, failing to pay salaries and would continue cutting social benefits.

Bessent said economic pressure was exposing disagreements among Iranian politicians, the Revolutionary Guards and the supreme leader. He described some IRGC commanders as isolated from the public and unaware of the extent of the economic deterioration.

‘More intense’ pressure ahead

Iran's economy has come under mounting pressure from two rounds of war with the United States and Israel, a US naval blockade that has sharply curtailed its oil exports and an expanding sanctions campaign targeting its remaining sources of foreign currency.

“Iran, for the first time, probably since oil was discovered, has no oil on the water,” Bessent said. “There have been no loadings at Kharg Island. Production is starting to falter.”

“We've been going for eight weeks, and I can tell you the next eight weeks is going to get even more intense,” he said.

Bessent said Washington remained prepared to negotiate, but insisted Iran could not have a nuclear weapon and must stop financing regional armed groups.

Diplomatic efforts have intensified in recent days, with Qatari mediators in Tehran on Sunday followed on Monday by senior officials from Saudi Arabia, Pakistan and Turkey seeking to de-escalate tensions and revive negotiations.

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Tehran, however, has shown little sign of softening its core demands under mounting economic pressure. Iranian officials insist Washington must meet its conditions, including lifting the naval blockade.

Targeting Iran's middlemen

Bessent also appealed directly to people involved in moving Iranian government money overseas, saying some financial intermediaries were already refusing to return funds to Tehran.

Iranian officials commonly refer to such intermediaries as “trustees,” who handle oil revenues and other transactions outside the formal banking system to circumvent sanctions.

“We are seeing the regime go bankrupt,” Bessent said. “So many of the people who are holding money outside of Iran do not want to send it back in.”

He said Iranians inside the country, members of the diaspora and employees of embassies and consulates could provide information to Treasury under its whistleblower program, with rewards of up to 30% of recovered funds.

“We are happy to unsanction individuals who work with us,” he said, adding that cooperating intermediaries could potentially claim 30% of funds they were holding for Tehran.

Bessent said Treasury was also tracking Iran's attempts to move money through cryptocurrency and foreign banks.

“There are numerous banks… We shut the Dubai branches of an Egyptian bank. We closed a Turkish bank, the second-largest Russian bank, VTB. We discovered that their external branches outside of Russia were aiding the regime,” he said.

‘Nothing like this’

Bessent rejected suggestions that Iran could wait for the US midterm elections in the hope that Washington's approach would change.

“Nothing will change in terms of President Trump's calculus, in terms of how resolute we are here at Treasury, in terms of the blockade,” he said.

Asked whether the combination of sanctions and a naval blockade had any historical precedent, Bessent said the closest comparison was Washington's campaign against Venezuela, but argued that the measures imposed on Iran went substantially further.

“There's been nothing like this,” he said.

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The US naval blockade has exposed a limitation in Tehran’s sanctions-evasion machinery: ship-to-ship transfers, false paperwork and steep discounts can disguise and sell crude once it is at sea, but they cannot get fresh cargoes out of Iranian ports.

For months, Iran was able to keep selling oil to China because millions of barrels had already left the country on tankers and were sitting in Asian waters. That reserve is now effectively exhausted.

Kpler analysts cited by The Wall Street Journal on Wednesday estimated Iran had about 135 million barrels in overseas storage when the war began in February. By October 5, that had fallen below one million barrels.

Vortexa gave a different figure, estimating Iranian stocks off Singapore at roughly six million barrels on October 9. The difference reflects varying tracking methods and locations, but both show that the offshore stocks that sustained Iranian exports have been largely depleted.

The Malaysia route dries up

Malaysia sits at the heart of how Iranian oil has reached China, serving mainly as a transfer point rather than the true source of much of the crude.

The Wall Street Journal reported in May on ship-to-ship transfers of Iranian crude off the Malaysian coast.

A sharp drop in China’s purchases recorded as Malaysian crude could therefore provide another indication that the flow of Iranian oil through the system has dried up.

But the figures are not a one-for-one measure of Iranian exports. Chinese customs data record the declared origin of cargoes, while ship tracking can miss transfers or vessels operating without transponders.

The timing nevertheless coincides with the depletion of the offshore stocks that had fed the trade. If no new Iranian crude is available for transfer near Malaysia, fewer cargoes would be expected to appear in Chinese data under a Malaysian origin.

China turns to other suppliers

China remains Iran’s most important potential buyer, but its independent refineries are already lining up alternatives.

Reuters reported on October 6 that Chinese “teapot” refineries had purchased at least 12 million barrels of Iraqi and Qatari crude for delivery in October and November. Traders suggested the total could reach 15 million to 20 million barrels.

Iranian oil had been attractive largely because of its steep discount. Iraqi and Qatari cargoes may cost more, but they arrive through normal channels and carry less risk of sanctions trouble or sudden interruptions.

Iran could offer deeper discounts or rely more heavily on intermediaries to retain Chinese customers. Neither solves the central obstacle: the oil still has to be loaded and shipped.

Reuters reported in August that offers of Iranian oil to Chinese buyers had already fallen as stored cargoes were sold.

Few alternatives to tankers

Jask, on the Gulf of Oman, is often cited as Iran’s alternative export outlet. The Goreh–Jask pipeline and terminal were built so oil could reach the sea without passing through the Strait of Hormuz.

So far, however, the facility has not shown it can replace Iran’s main export system.

The International Energy Agency’s February 2026 factsheet described Jask as effectively out of regular service. S&P Global later reported tanker activity there between March and July, indicating occasional use.

That suggests the route can handle some cargoes, not that it can support exports on the scale Iran needs. A port outside Hormuz is also not necessarily beyond the reach of a blockade aimed at Iranian ports.

Rail and trucking through neighboring countries offer still less capacity. They face high costs, limited infrastructure, border procedures and sanctions risks.

The pressure shifts onshore

If crude cannot be exported, Iran’s problem moves from the sea back to its oil fields.

Tehran can send more crude to domestic refineries, use available storage or cut production. Kpler estimated earlier in the blockade that Iran had already begun reducing output as inventories rose and usable storage space tightened.

Usable storage is not the same as total tank capacity: some tanks hold condensate, and not all can simply be switched to crude.

Further production cuts would mean less revenue and could make restarting output more difficult. But continuing to pump oil with nowhere to send it risks filling remaining storage and eventually forcing deeper cuts.

The financial impact will also emerge gradually because payments for cargoes already delivered can arrive weeks later.

The United States says the blockade has denied Iran at least $25 billion in oil revenue, a CENTCOM estimate cited by the Journal rather than an independently verified measure of Tehran’s net losses.

Iran has not forgotten how to evade sanctions or lost the network it built to sell oil despite them. But before Tehran can disguise a cargo, transfer it between ships or sell it at a discount, it first has to get the oil out of Iran.

In September, China imported just 276,000 barrels per day of oil recorded as Malaysian, down from an average of nearly 1.3 million barrels per day in 2025.

In some previous months, the figure had reached 2 million barrels per day. That is roughly four times Malaysia's total oil production.

Much of the discrepancy may reflect oil coming from Iran but recorded by China's customs as originating in Malaysia, alongside sanctioned oil from other producers and genuine Malaysian exports.

Chinese customs authorities have consistently reported zero monthly imports of Iranian oil since 2020. Yet tanker-tracking companies estimate that Iran delivered an average of around 1.5 million barrels per day to China last year.

Sanctions and blockade

Kpler previously told Iran International that most Iranian oil exports to China are recorded as Malaysian, while some cargoes are declared as originating from Iraq, Oman and even the United Arab Emirates. TankerTrackers has also documented the practice.

The decline in China's recorded Malaysian imports has accelerated as US sanctions have tightened and the naval blockade has choked off Iranian exports.

Kpler data obtained by Iran International show that Iran delivered more than 1.55 million barrels per day of oil to China between January and May this year. From June through September, the average fell to less than half that level.

By mid-October, the volume of Iranian oil afloat outside the US blockade line had fallen to zero.

If current trends persist, China's imports of oil recorded as Malaysian could fall to their lowest level in years, potentially approaching the 2017 level of just 130,000 barrels per day as early as this month or next.

Alternative suppliers

While Iranian oil exports have collapsed, tanker-tracking data show that overall oil exports from the Middle East have recovered to prewar levels and even surpassed them.

The Wall Street Journal, citing Kpler data, reported that the region's exports of oil and petroleum products have reached 24 million barrels per day, above the level recorded before the war.

Before the war, more than 80% of the oil passing through the Strait of Hormuz was destined for Asian markets, with China the largest buyer.

Chinese customs data show that in September, China imported an average of 2.9 million barrels per day from Oman, the United Arab Emirates, Qatar, Saudi Arabia and Iraq, up from less than 2 million barrels per day in May.

The figure nevertheless remained below February's prewar level, when China's combined imports from those five countries exceeded 3.8 million barrels per day.

The numbers also reflect a broader shift in Chinese oil buying after the outbreak of war. As global prices surged, China at one point cut overall crude imports by around 30% and drew instead on its strategic petroleum reserves.

In that sense, China acted as a significant shock absorber, helping limit an even sharper increase in global oil prices.

Before the war, China imported around 11.5 million barrels per day of crude. Following the US-Israeli war on Iran and disruption of traffic through the Strait of Hormuz, imports fell to around 8 million barrels per day before recovering more recently to above 9 million.

The shift suggests that China is increasingly replacing lost Iranian barrels with oil from other Middle Eastern producers. The disappearance of China's “Malaysian” imports is yet another measure of how sharply the blockade has curtailed Iran's access to its most important oil market.