The European Union’s response to Iran in 2023 was shaped by a familiar tension. Brussels wanted to signal firm opposition to Tehran’s proliferation and militarized exports while avoiding steps that would immediately fracture diplomatic channels or destabilize global energy markets. The result was a package of targeted restrictions and retained non-proliferation measures that tightened controls on specific technologies and actors but stopped short of a broad, renewed oil embargo by the EU itself.
Those legal choices matter because oil revenue remains the single most consequential source of state income that Tehran can flex to sustain its regional posture. In 2023 Iran’s oil production and exports trended higher compared with the immediate post-2018 sanctions trough, driven in large part by significant demand from Chinese refiners and by maritime workarounds that obscure origin and ownership. Independent analytics and market reporting in 2023 documented a sharp rise in seaborne flows to China and a revival of exports via ship-to-ship transfers and opaque intermediaries.
At the same time Washington’s financial authorities moved to make the connection between petroleum revenues and Iran’s proxy networks explicit. In late November 2023 the U.S. Treasury designated elements of an oil trading and shipping apparatus tied to Iran’s military logistics and flagged how those revenues underwrite a range of regional activities. That designation highlighted both the institutional pathways Tehran uses to monetize commodity sales and the mechanisms by which funds are channeled to proxies.
Putting these threads together reveals why EU actions in 2023 had only limited immediate impact on Tehran’s capacity to finance proxies. First, the EU measures of 2023 were focused on proliferation-related goods, UAV components and individual designations rather than on reintroducing the wide energy-sector trade prohibitions that the Union imposed in 2012. The 2012 EU regulatory architecture showed the Union could cut off insurance, banking and trade services to choke energy flows when it chose to do so. Brussels’ 2023 posture was different: it retained legal tools and targeted listings but did not resurrect a Europe-wide import ban on Iranian crude.
Second, practical evasions blunt the effect of targeted restrictions. Iranian sellers and their partners have exploited buyer concentration, bilateral commercial workarounds and maritime concealment to sustain exports. Small private Chinese refiners, known in trade circles as teapots, took on the bulk of discounted Iranian crude in 2023. Ship-to-ship transfers, reflagging and document manipulation reduce the efficacy of measures that rely on transparent origin and conventional banking routes. In short, narrower EU measures raise costs and constrain some channels but do not by themselves sever the principal revenue flows if large buyers remain willing to accept discounted barrels and third-party commercial arrangements.
That does not mean EU policy was irrelevant. Targeted sanctions, export controls and designations are cumulative. They raise transaction costs, complicate logistics for intermediaries and create legal risks for insurance, financing and port services. Over time these frictions can shrink the pool of counterparties willing to touch Iranian-origin crude and can push more trade onto riskier, more detectable routes. Coordinated measures that combine EU restrictions with U.S. financial pressure and multilateral maritime enforcement are more likely to constrict revenue flows than unilateral or symbolic steps.
For Tehran, the policy implication is straightforward. When access to mainstream markets or banking is impaired, Iranian actors redirect income through front companies, military-owned trading houses and informal banking channels that are harder to regulate but also less efficient. Those inefficiencies matter strategically. They increase the cost of sustaining external operations and reduce the fungibility of funds. Yet the evidence from 2023 showed that these inefficiencies were not sufficient to eliminate funding: revenues persisted at a scale that allowed continued material support for proxies, even if the accounting and routing became more opaque.
What should policymakers in Brussels take from 2023? First, a narrow focus on export controls for weapons-related items must be complemented by a broader friction strategy directed at the maritime and financial enablers of oil trade. Second, the EU’s leverage will remain constrained unless major buyers and flag, port and insurance hubs are brought into alignment. Third, sanctions design must anticipate adaptative behavior: designations should follow the money and the logistics, not only the weapons. Finally, long-term disruption of proxy funding requires a mix of tools beyond sanctions: diplomatic outreach to choke points, targeted interdictions in coordination with partners, and legal measures that remove the permissive services that underwrite shadow shipping.
In short, EU measures in 2023 demonstrated political will to punish proliferation and supply chains for UAVs and related technologies. But absent an EU-wide return to comprehensive energy restrictions and without tighter international cooperation against shadow maritime networks and front-company finance, Tehran retained sizeable channels to monetize oil and to sustain proxy activities. The strategic path forward for the EU is to move from unilateral symbolism to calibrated, coalition-based pressure that targets the enablers of oil revenue rather than oil sales alone.