The Trump administration's efforts to impose a "zero-leakage" financial blockade on Iran face a significant test as an estimated 40 million barrels of crude oil remain on "shadow fleet" tankers near Malaysia, outside the primary U.S. naval blockade in the Persian Gulf.
This floating stockpile, comprising approximately 20 very large crude carriers, could allow Tehran to generate revenue even as fresh exports are sharply curtailed. The situation presents a challenge for the administration's financial "endgame" against Iran. Treasury Secretary Scott Bessent recently launched Operation Economic Outcast, aiming to cut off Iran's remaining revenue sources through a "zero-leakage approach."
While the tightened blockade has reduced China's imports of Iranian crude to an estimated 534,000 barrels per day from 823,000 barrels per day in July, according to provisional Kpler data, the oil already beyond the blockade line remains a potential source of cash for Iran. If monetized, these funds could be used for imports and to finance military rebuilding.
This scenario tests whether the administration can deliver the "total isolation" it has pledged. Max Meizlish, a former Treasury official and senior fellow at the Foundation for Defense of Democracies, noted that the blockade in its current form does not prevent the flow of oil that has already passed its line. Iran has employed ship-to-ship transfers at sea to obscure the origin of its oil before it reaches buyers, often independent Chinese refineries.
To counter this, the U.S. Treasury has sanctioned Chinese and Hong Kong trading houses, maritime service providers, and other entities facilitating Iran's sanctions evasion. However, the administration has stopped short of designating a major Chinese financial institution that handles transactions. Meizlish suggested that formally designating such an institution could increase pressure on its owner, China National Petroleum Corporation, and disrupt a key channel for moving Iranian oil revenue.
The administration has previously targeted tankers involved in these transfers, including sanctioning the Hong Kong-flagged tanker Lynn in April for conducting ship-to-ship transfers off Malaysia. Meizlish proposed expanding pressure on shadow-fleet vessels operating near Malaysia and elsewhere in Asia to prevent oil from reaching Chinese buyers. He stated that further action could be taken against these tankers to prevent revenue from reaching Tehran and potentially funding military capabilities.
A Department of Defense official affirmed that U.S. forces would continue "global maritime enforcement" to disrupt illicit networks and interdict sanctioned vessels supporting Iran "wherever they operate, at the time and place of our choosing." A Treasury spokesperson added that "anyone foolish enough to continue doing business with the Iranian regime cannot continue to enjoy access to the global financial system" and that "every remaining economic lifeline Tehran has" will be cut.
Meizlish acknowledged that intercepting these tankers is complex, as the U.S. Navy is already stretched. Seizing ships and cargo can lead to legal disputes over ownership and the disposition of the oil. He suggested that Congress could streamline the process for seizing illicit cargoes and that Washington should explore ways to increase its capacity to pursue shadow-fleet vessels if the Navy cannot manage alone.
Treasury Secretary Bessent's campaign extends beyond oil to target digital assets, technology, gold, aviation, and shipping, with threats of broader secondary sanctions against entities dealing with Tehran. The administration's success in preventing the monetization of this existing oil stockpile will determine the effectiveness of its "zero leakage" policy.