Iran’s Oil Production Faces Challenges After U.S. Action in Venezuela

Iran’s oil production is encountering significant hurdles following recent U.S. military actions in Venezuela. Despite achieving record levels of output, Iran’s energy sector faces renewed uncertainty as trade partners reassess their dealings with the country amidst heightened geopolitical tensions. The U.S. intervention in Venezuela on January 3, 2024, has raised questions about potential ramifications for Iran, which has been navigating sanctions since 2018.

Over the past few months, Iran has increased its oil output to levels not seen in years, even with ongoing U.S. sanctions and military strikes by Israel. The nation has cultivated strong ties with China and other global powers, allowing it to bypass restrictions and maintain crude exports. Estimates suggest that Iran’s production could reach between 3.2 million and 4 million barrels per day (bpd) in 2024, recovering from a low of 2.9 million bpd in 2019.

Iran holds the world’s fourth-largest proven oil reserves, accounting for approximately 9 percent of global totals, trailing only behind Venezuela, Saudi Arabia, and Canada. The country also possesses significant natural gas reserves, representing 17 percent of global shares. Historically, Iran was a major player in the oil market, producing over 6 million bpd at its peak in 1974. However, sanctions and conflict have severely impacted its production capabilities.

Despite the obstacles, Iran has managed to rebuild its oil output, largely due to a combination of lax enforcement of U.S. sanctions and its strategic partnerships. China’s role is pivotal, as it has become the primary buyer of Iranian crude, accounting for around 13.6 percent of China’s oil imports in the first half of 2025. Reports indicate that China has been purchasing approximately 1.38 million bpd of Iranian oil, facilitated by discounted prices that make Iranian crude attractive amid sanctions.

Chinese independent refiners, often referred to as “teapots,” dominate the market for Iranian oil. These smaller companies, particularly those based in Shandong Province, have increased their purchases of Iranian crude, especially following new import quotas in November. However, state-owned oil companies in China tend to steer clear of Iranian oil due to concerns over U.S. sanctions.

While Iran’s export levels have improved, the country’s economy remains precarious. Inflation has soared, with a headline rate of 42.2% recorded in December. A former senior Iranian oil official expressed that even with rising export volumes, the key issue lies in the repatriation of revenues, which faces numerous hurdles. This ongoing economic strain has led to widespread protests within Iran, exacerbated by the government’s decision to raise gasoline prices to counter unsustainable subsidies.

The recent U.S. military intervention in Venezuela, which involved the capture of President Nicolas Maduro, has sparked concerns about potential U.S. actions in Iran. President Donald Trump has hinted at military options in other countries, including Colombia and Mexico, raising the stakes for Iranian officials, who have warned that U.S. intervention could provoke retaliatory actions against American troops.

As both Iran and Venezuela face sanctions, the geopolitical landscape is shifting. The U.S. action in Venezuela is likely to impact future oil trade dynamics, potentially causing Chinese refiners to reconsider their reliance on Iranian crude. The long-term effects of these developments remain uncertain, with analysts closely monitoring the evolving situation.