Trade between Iran and Western countries is severely restricted due to the comprehensive sanctions, but not completely prohibited. Germany remains the most important Western trading partner with a trade volume of over 1 billion euros in 20241The volume of trade between Iran and Germany exceeds one billion euros 🌐 https://diihk.com/de/news/102220240946/ .
The EU-27 mainly imports food from Iran, in particular nuts, fruit, spices such as saffron and carpets. The total trade volume between the EU and Iran totalled around 4.5 billion euros in 20242Iran's trade volume with the USA and the EU until 2024 - Statista 🌐 https://de.statista.com/statistik/daten/studie/858898/umfrage/warenhandel-des-iran-mit-den-usa-und-der-eu/ . Germany mainly exports machinery, pharmaceutical products and chemicals to Iran, while Austrian exports consist mainly of pharmaceuticals and machinery3Goods worth 241 million euros exported to Iran 🌐 https://www.destatis.de/DE/Presse/Pressemitteilungen/2024/04/PD24_157_51.html .
Trade with the USA is minimal and only amounts to around 97 million euros per year4Iran's trade volume with the USA and the EU until 2024 - Statista 🌐 https://de.statista.com/statistik/daten/studie/858898/umfrage/warenhandel-des-iran-mit-den-usa-und-der-eu/ . This shows the effectiveness of the US sanctions, which are enforced particularly strictly.
Impact of sanctions on Iran's war chest
The sanctions have a significant impact on the Iranian economy, but they do not completely prevent the financing of regional activities. Iran's economy is weakening under the pressure of sanctions - the inflation rate is over 30 per cent and the rial has lost much of its value5Sanctions have maimed Iran for years - that should be a warning for Putin 🌐 https://www.fr.de/wirtschaft/wirtschaft-russland-ukraine-krieg-sanktionen-iran-iranische-zr-93050525.html .
Nevertheless, Iran continues to generate significant revenues from oil exports, mainly to China. China buys around 90 per cent of Iran's oil exports, circumventing sanctions through an ingenious system of "teapot" refineries and shadow tankers6China uses 'teapot' refineries and ghost tankers to circumvent Iranian oil sanctions 🌐 https://www.cryptopolitan.com/de/china-dodges-u-s-iran-oil-sanctions/ . China's Iranian oil imports reached a peak of 1.91 million barrels per day in March 20257China's Iranian oil imports rose to 1.91 million barrels per day in March 🌐 https://www.agenzianova.com/de/news/Die-iranischen-%C3%96limporte-nach-China-stiegen-im-M%C3%A4rz-auf-191-Millionen-Barrel-pro-Tag/ .
Iran also exports significant quantities of natural gas, especially to Turkey. Gas exports to Turkey rose by 30 per cent to over 5.58 billion cubic metres in 20248Iran reports 30% surge in gas exports to Turkey 🌐 https://www.tehrantimes.com/news/511742/Iran-reports-30-surge-in-gas-exports-to-Turkey . Paradoxically, Iran exports gas despite its own energy shortages, as the export revenues far exceed the subsidised domestic prices9Iran's energy exports rise as domestic grid falters 🌐 https://www.iranintl.com/en/202505222460 .
Who fills Iran's war chest?
Iran has a complex financing network that includes both state and non-state actors:
Main sources of funding:
China as the main customer: China is by far the most important financier of Iran's state finances. The 25-year co-operation agreement between Iran and China covers investments of up to 400 billion dollars10China and Iran defy US sanctions: New rail link revolutionises trade 🌐 https://www.kettner-edelmetalle.de/news/china-und-iran-trotzen-us-sanktionen-neue-eisenbahnverbindung-revolutioniert-den-handel-27-05-2025 . Iran is China's third largest oil supplier and a new railway connection reduces the transport time from Shanghai to Tehran to just 15 days11China and Iran defy US sanctions: New rail link revolutionises trade 🌐 https://www.kettner-edelmetalle.de/news/china-und-iran-trotzen-us-sanktionen-neue-eisenbahnverbindung-revolutioniert-den-handel-27-05-2025 .
Shadow banking system: In 2024, the US sanctioned a network of 22 companies in Hong Kong, the UAE and Turkey that acted as "shadow banks" for Iranian oil sales12USA imposes sanctions against Iran's shadow banking network 🌐 https://de.investing.com/news/politics-news/usa-verhangen-sanktionen-gegen-schattenbankennetzwerk-des-iran-93CH-3060257 . These networks enable Iran to conceal hundreds of millions of dollars in oil revenues and circumvent international sanctions.
Russian co-operation: Russia pays for Iranian weapons with cash and technology. According to reports, Russia flew 140 million euros in cash to Tehran as payment for drone deliveries13Ukraine war: Putin had 140 million euros in cash flown to Iran for drones 🌐 https://www.bild.de/politik/ausland/politik-ausland/ukraine-krieg-putin-liess-140-mio-euro-bargeld-fuer-drohnen-in-den-iran-fliegen-81894482.bild.html . Russia supplies cyber weapons and military technology to Iran in return14Cyber weapons against drones: Brisk trade between Moscow and Tehran 🌐 https://www.fr.de/politik/ukraine-krieg-russland-iran-cyberwaffen-shahed-drohnen-handel-teheran-moskau-news-aktuell-92176932.html .
Financing of proxy groups:
Iran supports various armed groups in the region with considerable financial resources:
- Hamas: Received at least $154 million between 2014 and 2020, with up to $30 million per month15Documents prove Iran's financing of Hamas 🌐 https://www.mena-watch.com/dokumente-belegen-iran-finanzierung-der-hamas/
- Hezbollah: Has been supported with 100-200 million dollars annually since the 1980s16Political relations between Syria, Iran and Lebanon 🌐 https://www.bundestag.de/resource/blob/415000/2e4385c963876fa17dba9966ec901428/wd-2-217-06-pdf-data.pdf
- Islamic Jihad: Receives an estimated 70 million dollars per year17Financiers of Islamic Jihad: the string-pullers from Tehran 🌐 https://taz.de/Geldgeber-des-Islamischen-Dschihad/!5870475/
- Houthi rebels: Financing volume unknown, but substantial18How and why Iran supports enemies of the West 🌐 https://www.deutschlandfunknova.de/beitrag/nahost-konflikt-wie-und-warum-der-iran-feinde-des-westens-unterst%C3%BCtzt
Avoidance of sanctions:
Iran uses a sophisticated system to circumvent sanctions: The Islamic Republic lives partly "from smuggling"19A state lives from smuggling 🌐 https://iranjournal.org/wirtschaft/ein-staat-lebt-vom-schmuggel goods worth 25 billion dollars are smuggled annually - equivalent to half of Iran's budget20A state lives from smuggling 🌐 https://iranjournal.org/wirtschaft/ein-staat-lebt-vom-schmuggel .
The United Arab Emirates plays a key role as a re-export hub through which 21 billion dollars in goods reach Iran21Economic outlook for Iran 🌐 https://www.gtai.de/de/trade/iran-wirtschaft/wirtschaftsausblick . Malaysia acts as a front country for Iranian oil exports to China - 60 per cent of Iranian oil is sold through Malaysian intermediaries22Iran sells crude oil to China at a high discount 🌐 https://iranjournal.org/news/iran-verkauft-erdoel-mit-hohem-rabatt-an-china .
Western sanctions have considerably weakened Iran economically, but have not completely isolated it. China is the most important financier of Iranian state finances and enables Iran to maintain its regional power projection. Iran uses a complex network of shadow banking, smuggling routes and proxy financing to fund both its own economy and support regional allies.
While direct trade with the West is minimal, Iran has sufficient alternative sources of funding to fill its "war chest". The sanctions have increased the cost of these activities, but have not completely stopped them.
