By Zarak Khan | 2026-05-21

International waters near Malaysia have emerged as a critical front in the U.S. campaign to cut off Iran's oil revenues, as Tehran increasingly relies on covert maritime networks in Southeast Asia to evade sanctions and sustain its economy despite mounting Western pressure.

Despite tighter U.S. naval monitoring of Iranian ports and shipping routes near the Strait of Hormuz, Tehran has continued to move crude through a sprawling "dark fleet" operating across Southeast Asian waters, according to maritime analysts.

Much of the activity is centered near Malaysia's southern Johor state, where ship-to-ship transfers conducted beyond crowded shipping lanes have become increasingly difficult to track.

Patchy results for blockade

Since the start of the U.S. blockade on April 13, aimed at choking off Iran's revenue streams, U.S. forces have redirected 85 ships attempting to circumvent it, CENTCOM said on May 18.

U.S. officials have repeatedly sanctioned shipping firms, brokers and insurers linked to this trade.

However, enforcement remains a challenge because many operations take place in poorly monitored international waters involving layered ownership networks.

Despite U.S. sanctions, "approximately 30 Iranian-flagged vessels continue to operate openly across sea lanes, ports, and anchorages throughout the Indo-Pacific region," United Against Nuclear Iran (UANI), a U.S.-based advocacy group, said on May 18.

Ghost fleet hotspot

Maritime analysts and satellite tracking data show that tankers associated with Iran's shadow fleet are increasingly loitering near the Eastern Outer Port Limits (EOPL) anchorage.

This critical maritime zone in the South China Sea lies about 45 miles off the coast of peninsular Malaysia, within the country's Exclusive Economic Zone.

The area sits along one of the world's busiest maritime trade routes and roughly halfway between Iran and China, which buys about 90% of Iran's oil exports.

Waters off Malaysia's southern Johor state have become a major hub for Iran's dark fleet -- aging tankers that often disable tracking systems, conceal ownership records and transfer crude at sea to obscure its origin. Much of the oil is destined for China, observers say.

Surge in illicit activity

Data compiled by UANI indicate a sharp escalation in activity in the region since the U.S.-Israeli conflict with Iran began February 28.

At least 32 Iran-flagged tankers have entered Southeast Asian waters bound for the EOPL anchorage off Johor state, Malaysia, according to UANI. At the same time, the organization recorded at least 35 Iran-flagged tankers returning empty to Iran from the Malaysian EOPL anchorage and surrounding Southeast Asian sea lanes.

The Iran-flagged vessel VELON 1, sanctioned by the U.S. Treasury's Office of Foreign Assets Control, is expected to arrive at Port Klang, Malaysia, on May 29 after departing Russia on April 23, according to UANI.

Another Iran-flagged tanker, HUGE, likely carrying Iranian oil bound for China, was tracked on May 13 transiting northbound through the South China Sea after apparently departing Iran following imposition of the blockade.

The vessel appeared to take an uneconomical route via Indonesia's Lombok Strait while keeping its Automatic Identification System signal active, said UANI. The tactic seems designed to prevent interdiction by U.S. forces in the Malacca and Singapore straits.

The organization said it had documented at least 43 ship-to-ship transfers of Iranian oil at the EOPL anchorage, which it calls "a ghost fleet hotspot." It lies approximately 45 miles off Malaysia's coast. All of these transshipments have been spotted in satellite imagery, it said.

Malaysia could do more

Malaysia could enforce regulations requiring advance notification of ship-to-ship transfers, thwart Malaysian companies that support sanctioned vessels and compel ships operating in its waters to carry adequate insurance against accidents and oil spills, said UANI.

"Because of Malaysia's inaction, it is facilitating this business model by Iran, China and dark fleet actors," Charlie Brown, a senior UANI adviser, told the Associated Press (AP) on May 14.

Malaysia risks becoming "a facilitator rather than merely a transit point" for illegal activity, he said.

However, the Malaysian government insists that many of the transfers occur outside its territorial waters and in remote areas beyond radar's reach.

"The selection of such locations is intended to exploit jurisdictional gaps and limit direct enforcement action by local authorities," Mohamad Rosli Abdullah, director general of the Malaysian Maritime Enforcement Agency, told the AP.