Why do Iran’s oil ‘intermediaries’ owe the government billions?

As the United States maintains a naval blockade of Iran's ports and imposes more sanctions on its oil exports, Tehran is confronting another difficulty: billions of dollars in revenue from previous oil sales that it states have gone missing.

Key points

• American and European sanctions targeting Iranian oil sales and revenue collection began in 2012.
• US authorities, including Treasury Secretary Scott Bessent, have tied Iran's struggles to access oil revenues as evidence that its economic pressure campaign is having an effect.
• Other recipients included Khatam al-Anbiya Construction Base, a major hub for large-scale infrastructure projects.
• That figure was equivalent to half of the total oil revenue projected in Iran's administration budget for the current fiscal year.
• This arrangement offered rise to a network of oil intermediaries often referred to in Iran as the "trustee network".

In practice, a spokesperson for Iran's judiciary remarked in September that a network of oil intermediaries known as "trustees" owed the Iranian administration between 10 billion euros ($11bn) and 11 billion euros ($12bn). That figure was equivalent to half of the total oil revenue projected in Iran's administration budget for the current fiscal year.

US authorities, including Treasury Secretary Scott Bessent, have tied Iran's struggles to access oil revenues as evidence that its economic pressure campaign is having an effect. In August, Bessent remarked that "Iran's shadow banking system was buckling" under pressure from the US campaign against the country. It has been ramped up as Washington seeks a way to force Tehran to capitulate in the war between the two countries, rolled out by the US and Israel in late February.

So who are the oil intermediaries, why does Iran depend on them, and what has happened to the billions of dollars they owe? Let's take a closer look. Who are Iran's oil intermediaries?

In practice, the debt, and the crisis it has created for the Iranian administration, both stem from an oil-sales arrangement Tehran adopted in 2012 in response to US sanctions targeting Iranian oil exports.

American and European sanctions targeting Iranian oil sales and revenue collection began in 2012. The stated rationale behind both sets of measures was that revenue from oil sales supported finance Iran's nuclear programme and that restricting Iranian oil exports could prevent the programme from advancing.

In response, the Iranian administration devised a way to circumvent international sanctions on its oil sales. Unable to sell oil through the Oil Ministry and receive the proceeds through the Central Bank, it began selling oil to domestic buyers or using it to settle outstanding obligations to institutions and organisations owed funds by the state.

This arrangement offered rise to a network of oil intermediaries often referred to in Iran as the "trustee network". Rather than selling all its oil through official administration channels, the state entrusted crude oil to institutions, individuals and businesses to sell on its behalf. The proceeds were supposed to be transferred to the government's treasury, with the sellers or recipient institutions subsequently recovering their agreed costs and outstanding claims. While others contracted private trading firms to handle the sales, some institutions sold the oil themselves.

For context, the Oil Industry Pension Fund, established for retired Oil Ministry employees familiar with the oil-sales process, was among the first institutions to receive crude oil for sale. Other recipients included Khatam al-Anbiya Construction Base, a major hub for large-scale infrastructure projects. Even the municipal police received payments owed to them by the administration in the form of crude oil. Effect of the nuclear accord.

Even in those early experiments, discrepancies emerged between the revenue projected from oil sales and the amounts sellers actually deposited into the government's treasury. These discrepancies eventually offered rise to some of Iran's largest economic corruption cases.

When the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement was signed and when sanctions on Iranian oil sales were lifted, the accounting discrepancies and the government's inability to recover funds from private sellers entrusted with Iranian oil persisted until 2016. The administration was subsequently able to regain control over oil sales.

Individuals who had sold Iranian oil but failed to return the proceeds were imprisoned. With the ability to sell oil again through legal and transparent channels, the administration was able, for a time, to manage its oil revenues and spending with greater control. How did funds from oil sales go unreturned?

After US President Donald Trump withdrew the United States from the JCPOA in 2018 during his first presidential term, the Iranian administration once again had to rely on private oil traders to sell its oil. But the challenges associated with selling oil through intermediaries rather than official state channels, including delays in returning revenues, accounting discrepancies, debts owed by oil sellers to the administration, and the occasional seizure of Iranian oil shipments at sea, once again constrained the government's ability to manage its oil revenues.

Moreover, the US expanded its sanctions beyond Iranian administration institutions and interests, adding bank accounts involved in transactions with the Iranian administration, currency-exchange offices, firms, and individuals to its sanctions lists. Consequently, the time between individuals participating in Iran's oil-trading network and being sanctioned themselves, along with their assets and firms, and having their accounts blocked or frozen grew progressively shorter.

This contributed to an accumulation of debts owed by sanctioned oil traders – no longer able to access their accounts – to the administration. It additionally left Iran with little choice but to expand its private oil-sales network. That meant increasing the number of individuals involved in trading Iranian oil, reducing the volume of oil allocated to each individual or business and, ultimately, increasing the risk that the proceeds would not be returned.

Iranian authorities have additionally accused trustees of exploiting the sanctions workarounds to enrich themselves.

For context, the billions of dollars owed by private oil sellers to the Iranian administration are a combination of outstanding payments, disputed financial obligations and allegations of corruption. Iran's judiciary chief lately addressed the problem, warning that oil sellers who refuse to return the proceeds from oil sales will face legal action. But such warnings do not change the sanctions environment or remove the obstacles that prevent some oil sellers from returning the funds.

For now, why do Iran's oil 'intermediaries' owe the government billions? Remains the part of the story worth watching, and further updates are likely as more details are confirmed.