Paris: Iran has relied on a secretive, barter-like financial mechanism to bypass international sanctions, exchanging crude oil for billions of dollars’ worth of Chinese imports, including air defence equipment, according to Iranian and international sources cited by Reuters.
The mechanism operates outside traditional international banking systems. Under the setup, Iranian oil sales generate credit lines rather than direct cash transfers. These credits are subsequently used to purchase Chinese goods, ranging from essential supplies like pharmaceuticals, vehicles, and communication equipment to military hardware.
According to data from commodities analytics firm Kpler, China purchased over 80 per cent of Iran’s exported crude in 2025, averaging roughly 1.4 million barrels per day. The trade arrangement has provided a crucial financial lifeline for Tehran amidst heightened political and economic pressure from Washington regarding its nuclear programme. In return, China has secured access to discounted energy while insulating its major exporters and banking institutions from secondary US sanctions.
Intelligence sources revealed that a buyer acting for state-owned Chinese oil trader Zhuhai Zhenrong deposited hundreds of millions of dollars monthly into an obscure, China-based entity known as ChuXin. These funds covered oil deliveries arranged through a Hong Kong-registered firm affiliated with the National Iranian Oil Company.
Roughly 70 per cent of the proceeds routed through ChuXin were designated for infrastructure projects in Iran. The remainder flowed into accounts managed by a Special Purpose Vehicle (SPV), overseen by entities representing China’s Ministry of Commerce and Iran’s central bank. Iranian importers authorized by Tehran could draw from this SPV estimated to have handled $2 billion to USD 2.5 billion in the past year—to settle accounts with Chinese suppliers.
The system has reportedly operated since at least 2021, initially facilitating shipments of medicines and COVID-19 vaccines before expanding to other commercial and defense sectors. There is no indication that Chinese manufacturers directly breached sanctions or were aware of the specific funding routes.
When asked about the arrangement, China’s foreign ministry stated it was unfamiliar with the situation, reiterating its opposition to unilateral sanctions not authorized by the UN Security Council. Iranian diplomatic missions in Geneva and New York did not respond to requests for comment.
A US official noted that Washington continues to collaborate with international partners to restrict Iran’s access to resources supporting its nuclear ambitions, though specific details regarding the trade scheme were not addressed.
