Why Do Iran's Oil Middlemen Owe the Government Billions?

While the United States maintains a naval blockade on Iran's ports and piles on more sanctions targeting its oil exports, Tehran is grappling with another problem: billions of dollars in revenue from past oil sales that the government says has vanished.

A spokesman for Iran's judiciary said in September that a network of oil middlemen known as "trustees" owes the Iranian government between 10 billion euros ($11 billion) and 11 billion euros ($12 billion). That figure is equivalent to half of the total oil revenue projected in Iran's current fiscal budget.

US officials, including Treasury Secretary Scott Bessent, see Iran's difficulty in accessing oil revenue as evidence that Washington's economic pressure campaign is working. In August, Bessent said that "Iran's shadow banking system is wobbling" under the strain of the US campaign against the country — a campaign that intensified as Washington seeks to force Tehran to capitulate in the war between the two countries, which the US and Israel launched in late February.

So who are the oil middlemen, why does Iran depend on them, and what happened to the billions of dollars they owe?

Who are Iran's oil middlemen?

Both the debt and the crisis it has created for the Iranian government trace back to an oil-sales mechanism Tehran adopted in 2012 to counter US sanctions targeting Iran's oil exports.

US and European sanctions aimed at Iran's oil sales and revenue collection began in 2012. The stated rationale for both sets of measures was that oil revenue helps finance Iran's nuclear program, and that restricting Iranian oil exports could prevent the program from advancing.

In response, the Iranian government devised a way to circumvent international sanctions on its oil sales. Unable to sell oil through the Ministry of Oil and receive payment through the Central Bank, the country began selling oil to domestic customers or using oil to settle outstanding obligations to organizations and entities the state owed money.

That mechanism gave rise to a network of oil middlemen commonly called the "trustee network" in Iran. Instead of selling all oil through official government channels, the state handed crude to organizations, individuals and companies to sell on its behalf. The proceeds were supposed to be transferred to the government treasury, after which the seller or the organization receiving the oil would be reimbursed for agreed costs and outstanding receivables. Some organizations sold the oil themselves; others contracted private trading companies to handle the sales.

The Oil Industry Pension Fund, established for retired Ministry of Oil employees familiar with oil sales procedures, was among the first organizations to receive crude for sale. Other recipients included Khatam al-Anbiya Construction Base, a major conduit for large-scale infrastructure projects. Even city police received government debts owed to them in the form of crude oil.

The impact of the nuclear deal

Even in the early experiments, gaps emerged between expected oil-sale revenue and the amounts sellers actually deposited into the government treasury. Those discrepancies later led to some of Iran's largest economic corruption cases.

The accounting irregularities and the government's inability to recover money from private oil sellers acting as trustees persisted until 2016, when the Joint Comprehensive Plan of Action (JCPOA) nuclear deal was signed and sanctions on Iran's oil sales were lifted. The government was then able to regain control over oil sales.

Those who had sold Iranian oil but failed to return the proceeds were jailed. With the ability to sell oil again through legal and transparent channels, the government was able for a time to manage oil revenue and spending with better oversight.

Why isn't oil revenue being repaid?

After US President Donald Trump withdrew the United States from the JCPOA in 2018 during his first term, the Iranian government once again had to rely on private oil traders to sell crude. But the problems tied to selling oil through intermediaries rather than through official state channels — including delayed repayment of revenue, accounting irregularities, sellers' debts to the government, and the occasional seizure of Iranian oil cargoes at sea — once again curtailed the government's ability to manage oil revenue.

Moreover, the US expanded sanctions beyond Iranian government organizations and interests, adding to its sanctions list bank accounts linked to transactions with the Iranian government, foreign exchange offices, companies and individuals. As a result, the window between someone joining Iran's oil trading network and being sanctioned themselves — with their assets and companies hit, accounts blocked or frozen — grew ever shorter.

This contributed to the accumulation of debts owed to the government by sanctioned oil traders who could no longer access their accounts. It also left Iran with little choice but to expand its private oil-sales network. That meant more participants in Iran's oil trade, smaller volumes of oil allocated to each individual or company, and ultimately a greater risk that proceeds would not be repaid.

Iranian officials have also accused the trustees of exploiting sanctions-evasion methods to enrich themselves.

The billions of dollars owed to the Iranian government by private oil sellers are a mix of unpaid amounts, disputed financial obligations and corruption allegations. Iran's judiciary chief recently raised the issue, warning that oil sellers who refuse to return proceeds will face legal action. But such warnings do not change the sanctions environment or remove the barriers that prevent some sellers from returning the money.