Inside the Secret Oil Trade Funding Iran’s Wars…

In a war with Israel, Iran would need money. Not just to buy weapons and keep its economy afloat, but to re-arm militias such as Hamas and Hizbullah. Many assume that, after years of sanctions, it would struggle. They are wrong. Every year Iran funnels tens of billions of dollars from illicit oil sales to bank accounts all over the world. This huge, secret treasure was used to fund Hamas’s attack on Israel a year ago, swarms of Russian drones in Ukraine and Iran’s own nuclear programme. It has already seeded many crises—and could soon fuel the mother of them all.

To understand how Iran can amass so much cash, zoom in on its petro-economy. Six years ago, when the Trump administration reimposed a blockade, Iran’s exports of crude oil collapsed. Since then, however, they have grown twelve-fold, to 1.8m barrels a day in September. Last year these sales generated $35bn-50bn; petrochemical exports added another $15bn-20bn. Smuggling oil on hundreds of tankers is hard. Covertly laundering billions of dollars via the global banking system is even harder. America keeps a watch on any bank, even foreign, that processes transactions in greenbacks. So how is Iran getting paid? And how does it move, store and spend such large amounts of money?

The Economist has spoken to a range of people with first-hand knowledge of Iran’s oil system. To check and verify what they told us, and flesh out the detail, we then sought information from other sources, including former sanctions officials, Iranian insiders, intelligence professionals and WikiIran, a third-party website soliciting leaks. Our investigation shows that the country has built sprawling shadow financial channels, which run from its oil rigs to the virtual vaults of its central bank. China, Iran’s main buyer, is an architect of this system, and its chief beneficiary. Global banks and financial hubs, often unknowingly, are used as vital cogs. A source familiar with Iran’s books says that, as of July, it had $53bn, €17bn ($19bn) and smaller pots of other currencies lying abroad.

Although enforcement has weakened in recent years,…