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Iran uses barter to bypass sanctions, buy Chinese goods including military gear

Created at 10 Sep · 6:08 AM1 source↑ Market-relevant
IN SHORT

Iran has established a barter-like arrangement to circumvent U.S. sanctions on its oil sales, enabling it to purchase billions of dollars worth of goods from China, including military equipment. This mechanism provides Tehran with a financial lifeline while allowing China to access discounted oil and shield its companies from international penalties.

Key Numbers

$2 billion to $2.5 billionestimated funds through SPV in the last year
80%of Iran's shipped oil to China in 2025
1.4 million barrels per dayaverage Iranian crude oil exports to China in 2025
70%of Iranian oil proceeds handled by ChuXin allocated to infrastructure projects

Who's Involved

Iran
uses barter arrangement to bypass sanctions and buy Chinese goods
China
supplies goods to Iran in exchange for oil
U.S. Treasury Secretary Scott Bessent
warned countries to cut business ties with Iran or risk exclusion from dollar system
Zhuhai Zhenrong
Chinese state-owned oil trader whose buyer allegedly deposited funds for Iranian oil
ChuXin
obscure China-based financial entity reportedly handling Iranian oil proceeds
China's Ministry of Commerce
entity reportedly managing funds in the SPV
Iran's central bank
entity reportedly managing funds in the SPV
Andrea Ghiselli
lecturer at the University of Exeter studying Beijing's relations with the Middle East
Iran uses barter to bypass sanctions, buy Chinese goods including military gear

↳ Why This Matters

This arrangement highlights Iran's ability to circumvent international sanctions, providing it with essential goods and financial resources, while also demonstrating China's willingness to engage in trade that challenges U.S. foreign policy objectives and potentially impacts global energy markets.

Key facts

  • Iran is using a barter-like system to exchange oil for Chinese goods, bypassing U.S. sanctions.
  • The arrangement allows Iran to purchase billions of dollars worth of items, including military gear, medicines, vehicles, and communication equipment.
  • This mechanism provides a financial lifeline to Tehran and allows China to access discounted oil.
  • A Chinese financial entity, ChuXin, reportedly handles hundreds of millions of dollars monthly for oil purchases.
  • Funds are allocated to infrastructure projects and companies supplying goods to Iran.
  • The system is managed by entities linked to China's Ministry of Commerce and Iran's central bank.

Iran has developed a clandestine barter-like system to circumvent U.S. sanctions, allowing it to purchase billions of dollars worth of goods from China, including military equipment, according to sources familiar with the matter. This arrangement provides Tehran with a crucial financial lifeline amid intensified U.S. economic and military pressure.

The mechanism involves Iran exchanging its oil for credits that can be used to buy Chinese imports. This strategy helps China, a major crude importer, secure discounted Iranian oil while shielding its banks and companies from international scrutiny and potential penalties. While the U.S. has sanctioned some smaller Chinese entities involved in facilitating Iranian oil shipments, it has refrained from imposing more severe measures that could disrupt the global economy.

Sources indicated that Iran has used this arrangement to acquire medicines, vehicles, and communication equipment. The mechanism was also reportedly used at least once in the past year to supply Iran with air defense equipment worth millions of dollars. However, Reuters could not independently verify these specific transactions.

Details of the trade mechanism suggest that a buyer for Chinese state-owned oil trader Zhuhai Zhenrong has been depositing hundreds of millions of dollars monthly with a Chinese financial entity known as ChuXin. These funds are then channeled to Chinese exporters and companies involved in infrastructure projects in Iran. Approximately 70% of the oil proceeds handled by ChuXin are allocated to infrastructure, with the remainder used to pay suppliers of goods to Iran. The funds within a special purpose vehicle (SPV) are reportedly managed by entities linked to China's Ministry of Commerce and Iran's central bank.

China's foreign ministry stated it was unfamiliar with the situation and reiterated its opposition to unilateral sanctions. A U.S. official confirmed the administration's efforts to deny Iran the means to advance its nuclear ambitions but did not comment on the specific arrangement. The barter system has reportedly been in place since at least 2021, initially facilitating the import of medicines and COVID-19 vaccines, and has become increasingly vital for trade as U.S. pressure on companies doing business with Iran has grown.

Frequently asked questions

It is a system where Iran exchanges its oil for credits, which are then used to purchase goods from China, bypassing international banking channels and U.S. sanctions.

Iran purchases a range of goods, including medicines, vehicles, communication equipment, and potentially air defense equipment.

Funds are reportedly managed through a special purpose vehicle (SPV) overseen by entities linked to China's Ministry of Commerce and Iran's central bank.

China's foreign ministry stated it was unfamiliar with the situation and reiterated its opposition to unilateral sanctions not authorized by the UN Security Council.

What Happens Next

01The U.S. may continue to monitor and potentially sanction Chinese entities involved in the trade.
02China and Iran may continue to seek ways to protect their trade interests against international restrictions.

How It Developed

Iran has used a barter-like arrangement to bypass sanctions on its oil sales and buy billions of dollars worth of goods from China.
The trade mechanism involves exchanging Iranian oil for credits for Chinese imports.
The arrangement has provided a financial lifeline for Tehran amid increased U.S. pressure.
China has retained access to discounted Iranian oil while shielding its banks and companies from penalties.
The U.S. has imposed sanctions on some smaller Chinese entities involved in facilitating Iranian oil shipments but has not applied the most severe measures.
A U.S. official stated the Trump administration works to deprive Iran of the material means to further its nuclear ambitions.
China's foreign ministry stated it was not familiar with the described trade situation and opposed unilateral sanctions.
Iran's U.N. missions did not respond to requests for comment.

Sources

T1
Exclusive-How a billion-dollar sanctions dodge kept Chinese goods flowing to IranReuters

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