• The U.S. Department of Justice is investigating $2.6 billion in oil trades suspected of evading sanctions on Iran, according to sources familiar with the matter.
  • The probe targets a network of traders and intermediaries allegedly using complex financial instruments to disguise the origin of Iranian crude.
  • The inquiry could lead to criminal charges and significant penalties, highlighting the Biden administration's intensified enforcement of Iran sanctions.

The U.S. Department of Justice has launched a criminal investigation into approximately $2.6 billion worth of oil trades that may have violated sanctions against Iran, according to people familiar with the matter. The probe, which is in its early stages, focuses on a series of transactions conducted over the past two years that allegedly used a web of shell companies and commodity trading houses to mask the Iranian origin of the crude, the sources said.

The investigation underscores the Biden administration’s renewed focus on enforcing sanctions as it seeks to pressure Tehran amid stalled nuclear negotiations. Officials from the DOJ’s Fraud Section and the Office of Foreign Assets Control (OFAC) are examining trading records and bank transfers, the people said. “This is a significant escalation in sanctions enforcement,” said a former federal prosecutor involved in similar cases, speaking on condition of anonymity. “The amounts involved and the sophistication of the alleged scheme suggest a coordinated effort to evade oversight.”

The trades in question involve crude oil shipped from Iran through third-country ports, with cargoes then resold using falsified documentation to appear as originating from Iraq or the United Arab Emirates, the sources said. The investigation has already led to subpoenas issued to several trading firms based in Geneva and Dubai, and authorities are scrutinizing the role of a major Asian refiner that may have unknowingly purchased the discounted crude. “We’re cooperating fully with the authorities,” a spokesperson for one of the firms said, declining to elaborate. Other companies contacted by Reuters did not respond to requests for comment.

The DOJ’s probe adds to a growing list of sanctions enforcement actions against Iran-linked trade. In 2023, the U.S. Treasury imposed sanctions on a network of companies and vessels accused of transporting Iranian oil to China. The new case, however, is notable for its sheer scale—$2.6 billion—and the involvement of major international banks used to process payments. Legal experts say the investigation could result in billions of dollars in fines and potential criminal charges against executives. “The DOJ is sending a clear message that using the U.S. financial system to facilitate Iran sanctions evasion carries severe consequences,” said a compliance lawyer in New York.

Market participants are watching the case closely, as it could tighten global oil supplies and drive up energy prices. Iran has ramped up oil exports in recent months, with production reaching 3.2 million barrels per day in June, according to OPEC data, much of which is sold to Chinese buyers through opaque channels. The probe could disrupt these flows, analysts say. “If enforcement actions disrupt Iran’s ability to sell oil, we could see a short-term spike in crude prices,” said energy analyst Sarah Johnson at consultancy ClearView Energy Partners.

The investigation also comes at a politically sensitive time. The Biden administration has faced criticism from both Republicans and some Democrats for not doing enough to enforce sanctions on Iran. In May, a bipartisan group of senators urged the Treasury to crack down on Iranian oil smuggling. The DOJ’s move may help quell some of that criticism, though details of the case are still emerging.

Attempts to reach the DOJ for comment were not immediately successful. A spokesperson for the Treasury Department declined to comment. The investigation remains ongoing, and sources caution that no charges have been filed.

Update: This article has been updated to include a response from one of the trading firms named in the investigation.