Iran has relied on a secretive, oil-backed trading mechanism to maintain the flow of Chinese goods despite intensifying U.S. and international sanctions, according to a Reuters investigation based on interviews with two senior Iranian sources and three other people familiar with the arrangement. Under the system, Iranian oil revenues are effectively converted into credits that can be used to purchase Chinese goods, allowing Iranian importers to obtain medicines, vehicles, communications equipment and other products without making direct payments through conventional international banking channels. The sources estimated that between $2 billion and $2.5 billion passed through a special purpose vehicle over the past year, providing Tehran with an alternative financial channel as Washington increased economic and military pressure over Iran’s nuclear program. The mechanism also reportedly played a role in at least one contract involving the supply of air-defense equipment worth millions of dollars, although Reuters was unable to independently verify the alleged transactions or establish the full details of the companies involved. The arrangement is believed to involve a network of entities linked to Iran’s national oil company, the Chinese state-owned oil trader Zhuhai Zhenrong, China’s Ministry of Commerce and Iran’s central bank. According to people familiar with the system, a China-based financial entity known as ChuXin received hundreds of millions of dollars each month on behalf of a buyer associated with Zhuhai Zhenrong, with the funds subsequently used to pay Chinese exporters and companies involved in infrastructure projects in Iran. Around 70% of the Iranian oil proceeds handled through the mechanism was reportedly directed toward infrastructure projects, while the remainder was transferred into an SPV used to pay suppliers providing goods to Iran. The Iranian sources said the SPV was managed jointly by entities representing Chinese and Iranian interests, with Iranian authorities notifying the Chinese side when importers were authorized to access the funds. Reuters, however, found no public record of a financial institution called ChuXin in Chinese corporate registries and could not independently establish the ownership structures or business activities of several other entities reportedly involved in the arrangement. The system has allegedly been operating since at least 2021 and was initially used to facilitate the supply of medicines and COVID-19 vaccines to Iran. Its importance has increased as Washington has expanded sanctions against companies involved in Iranian oil trade and warned countries that continued commercial ties with Tehran could expose them to secondary sanctions. China remains Iran’s dominant oil customer, accounting for more than 80% of Iran’s seaborne oil exports in 2025, with average shipments of about 1.4 million barrels per day, according to commodities data and analytics firm Kpler. Beijing and Tehran have also maintained a long-term strategic partnership, including a 25-year cooperation agreement signed in 2021 covering areas such as energy and infrastructure. China’s Foreign Ministry told Reuters that it was not familiar with the specific arrangement described by the news agency, while reiterating Beijing’s opposition to unilateral sanctions that lack a basis in international law or authorization from the United Nations Security Council. Iranian officials and several entities named in connection with the mechanism did not respond to requests for comment. The United States has meanwhile continued efforts to restrict Iran’s access to international finance and the resources it could use to advance its nuclear ambitions. The arrangement illustrates the growing complexity of Iran’s efforts to preserve trade under sanctions and China’s efforts to maintain access to discounted Iranian oil while limiting the exposure of its banks and companies to U.S. penalties. Analysts say Beijing has an incentive to resist American economic pressure, but it also wants to avoid measures that could isolate Chinese financial institutions from the global financial system. The result is a system built around indirect payments, intermediary entities and limited public disclosure, giving the parties involved a degree of distance from transactions that could attract international scrutiny.
How a Billion-Dollar Sanctions Workaround Kept Chinese Goods Flowing to Iran
