Experts consider the scheme “virtually unfeasible” through legal channels, Bloomberg writes.
However, the initiative has uncovered a large-scale infrastructure for circumventing sanctions. Last year alone, the IRGC spent more than $3 billion through digital assets. The value of the country’s entire cryptocurrency ecosystem reached $7.8 billion.
According to analysts at TRM Labs, Tehran authorizes the use of virtual currencies through a network of local intermediaries. This is part of a system designed to ensure government control over cryptocurrency flows.
For international transfers, Iran relies on intermediaries. For example, in January, the U.S. Treasury Department for the first time imposed sanctions against two British exchanges – they helped the IRGC to carry out stablecoin transactions worth about $1 billion. In this way, the country tried to conceal the payer’s connection to the sub-sanctioned organization.
Collecting the fee through a Corps-affiliated intermediary would deprive the participants of such a cover. Therefore, all difficulties fall on the shipping companies trying to pass through Hormuz.
Challenges for shipping companies
Many firms using the strait are registered in the West and subject to strict regulatory requirements.
“Shipping companies are already under tight control – they operate in a high-risk area. If there is a risk that a deal is subject to sanctions, no dealer will take it on,” explained Wintermute’s Jake Ostrovskis.
Even operators accustomed to gray schemes to circumvent sanctions will not be able to avoid problems. They usually turn to unregulated offshore brokers who exchange cash for cryptocurrency without too many questions. However, the situation is exacerbated by the transparency of the blockchain.
“Whether it’s stablecoins or bitcoin, it’s all in public registries. Sooner or later this transfer will be seen,” noted Bohan Jiang, a senior derivatives trader at FalconX.
GSR co-founder Rich Rosenblum noted that it all depends on the specific oil carrier. Companies in the so-called shadow fleet are already actively using bitcoin.
For traditional operators, the only way to get cryptocurrency is to buy it on an exchange or from an OTC dealer. However, there is a problem here: most regulated platforms will block a transfer if a link to Iran is detected.
The passage of a standard supertanker with 2 million barrels of oil can cost about $2 million. According to traders, this amount is easy to spend through an exchange or OTC dealer, if sanctions risks are excluded.
“But most exchanges will not want their client to send money to Iran. Technically, they could buy the cryptocurrency, withdraw it from the exchange and then send it from their personal wallet,” Rosenblum noted.
In such a case, because of the transparency of the blockchain, U.S. intelligence agencies would quickly trace the transaction and blacklist the owner of the tanker or the intermediary from OFAC.
What’s next?
U.S. President Donald Trump has said he is considering sharing the revenue from the Strait passage. If the parties manage to reach an agreement, the payment process could become simpler.
At the same time, Rosenblum believes that in such a scenario, OFAC and the Department of Energy will have to create a separate settlement system for shipping companies.
Ari Redbord of TRM Labs emphasized that Iran has always been looking for ways to circumvent sanctions and get out from under the U.S. financial system. After the start of the conflict, this task has become even more urgent.
“It’s part of a bigger picture. Russia and China, other sub-sanctioned entities, are also looking for alternative payment rails to avoid dependence on the West,” he added.
