Media: China-Iran trade mechanism moves billions in goods despite sanctions

Iran has used a barter-like arrangement to bypass sanctions on its oil sales and purchase billions of dollars’ worth of goods from China, including military equipment, according to Reuters.

The mechanism exchanges Iranian oil for credits used to buy Chinese imports. Two senior Iranian sources and three other people familiar with the matter said it had provided Tehran with a financial lifeline as the United States increased economic and military pressure over Iran’s nuclear programme.

The sources estimated that $2 billion to $2.5 billion passed through a special purpose vehicle (SPV) over the past year.

Iran has used the arrangement to purchase medicines, vehicles, communications equipment and, at least once in the past year, air-defence equipment worth millions of dollars, the sources said. Reuters could not independently verify the alleged transactions.

The mechanism also allows China, the world's biggest crude importer, to maintain access to discounted Iranian oil while reducing the exposure of Chinese banks and exporters to international sanctions.

China's foreign ministry said it was "not familiar with the situation" described by Reuters. It said China opposed unilateral sanctions that lacked a basis in international law and had not been authorised by the UN Security Council.

Avoiding international banks

China accounted for more than 80% of Iran's shipped oil exports in 2025, averaging about 1.4 million barrels per day, according to Kpler.

Three sources said the arrangement was one of several mechanisms allowing Iran to obtain Chinese goods and services without direct payments through international banking channels.

A Western official and two people familiar with the matter said a buyer acting on behalf of Chinese state-owned oil trader Zhuhai Zhenrong had, until at least this year, deposited hundreds of millions of dollars each month with a China-based financial entity known as ChuXin.

About 70% of the Iranian oil proceeds handled by ChuXin were allocated to infrastructure projects, while the remainder went into an SPV used to pay companies supplying goods to Iran.

All five sources said the SPV was managed by two entities, one acting on behalf of China's Ministry of Commerce and another linked to Iran's central bank.

Reuters found no record of ChuXin in Chinese company registries and no public records for the firms said to represent the Chinese commerce ministry and Iran's central bank.

Plausible deniability

The mechanism has operated since at least 2021 and was initially used to supply medicines and COVID-19 vaccines to Iran, three sources said. They estimated that $2 billion to $2.5 billion flowed through the SPV over the past year.

Zhuhai Zhenrong has previously been targeted by US sanctions over alleged dealings with Iran. Reuters could not independently authenticate a document provided by a source that appeared to show a business relationship between the company and Iran's national oil company.

Iran's national oil company, Zhuhai Zhenrong, Iran's central bank and China's commerce ministry did not respond to requests for comment.

Andrea Ghiselli, an international politics lecturer at the University of Exeter, said such arrangements allowed China to resist US pressure while avoiding the risk of its banks and companies being excluded from the international financial system.

"They want plausible deniability," he said.

By Aghakazim Guliyev