Iran Uses Oil Revenues in Secretive China Trade Channel to Bypass Sanctions

Iran has established a covert, barter-like mechanism that allows it to convert proceeds from oil sales to China into credits for purchasing Chinese goods, bypassing conventional international banking channels and U.S. sanctions, according to a Reuters investigation.

The system has reportedly moved coinbureau between $2 billion and $2.5 billion over the past year through a special-purpose vehicle, according to two senior Iranian sources and three other people familiar with the arrangement cited by Reuters. The goods purchased have included medicine, vehicles and communications equipment, while the mechanism was also used at least once for contracts involving military equipment.

The arrangement highlights the growing importance of alternative financial channels for Tehran as Washington intensifies pressure on Iran's oil trade and financial system.

Oil Revenues Converted Into Chinese Import Credits

According to sources cited by Reuters, the mechanism effectively separates Iranian buyers from Chinese suppliers. Oil proceeds are converted into credits that can then be allocated to approved Iranian importers, allowing payments to Chinese exporters without conventional cross-border transfers between the companies.

The structure reportedly involves entities linked to Iran's central bank and China's Ministry of Commerce. Reuters found no public record of a financial institution called ChuXin in Chinese company registries, while companies said to be involved in the arrangement could not be independently linked to the roles described by the sources.

The mechanism has reportedly existed since at least 2021 and was initially used to obtain medicines and COVID-19 vaccines. Its importance increased as sanctions made conventional financial transactions more difficult for Iranian companies.

China Remains a Critical Channel for Iranian Oil

China is Iran's dominant oil customer, with Kpler estimating that more than 80% of Iran's oil shipments went to China in 2025. That trade has provided Tehran with a crucial source of revenue despite U.S. restrictions on Iranian crude exports.

The reported use of the mechanism for military-related purchases adds another layer of concern for U.S. sanctions financial enforcement. In June, the U.S. Treasury sanctioned China- and Hong Kong-based individuals and companies accused of supporting Iranian weapons procurement networks, including networks connected to the acquisition of man-portable air-defense systems from China.

The development also comes as Iran faces tighter economic pressure and disruptions to its oil exports. The effectiveness of Washington's sanctions will markets increasingly depend on whether authorities can identify and disrupt alternative settlement structures that keep Iranian oil revenues circulating outside the conventional international banking system.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.