U.S. sanctions make it nearly impossible to pay Iran for its oil. China has figured out how to do it anyway, in an arrangement that has largely been secret.
The hidden funding conduit has deepened economic ties between the two U.S. rivals in defiance of Washington’s efforts to isolate Iran.
The barter-like system works like this, according to current and former officials from several Western countries, including the U.S.: Iranian oil is shipped to China—Tehran’s biggest customer—and, in return, state-backed Chinese companies build infrastructure in Iran.
Completing the loop, the officials say, are a Chinese state-owned insurer that calls itself the world’s largest export-credit agency and a Chinese financial entity that is so secretive that its name couldn’t be found on any public list of Chinese banks or financial firms.
The arrangement, by sidestepping the international banking system, has provided a lifeline to Iran’s sanctions-squeezed economy. Up to $8.4 billion in oil payments flowed through the funding conduit last year to finance Chinese work on large infrastructure projects in Iran, according to some of the officials.
Iran exported $43 billion of mainly crude oil last year, according to estimates by the U.S. Energy Information Administration. Western officials estimate that around 90% of those exports go to China.
China has been the predominant buyer of Iranian oil since 2018, when President Trump pulled the U.S. out of the 2015 nuclear accord and reimposed U.S. sanctions.
Two weeks after returning to office, Trump ordered the use of “maximum pressure” to force Tehran to curb its nuclear program and end support for allied militia groups. The directive sought to drive Iranian oil exports to zero.
Since then, the U.S. has imposed sanctions on Chinese individuals and small entities, but Iranian exports to China have continued largely unabated.
Beijing also provides political support for Iran. In September, Chinese leader Xi Jinping hosted Iranian President Masoud Pezeshkian at a multinational summit and at a military parade attended by the leaders of Russia and North Korea—a group joined in opposition to a U.S.-led world order.
Western nations succeeded recently in reimposing international sanctions on Tehran that were lifted under the 2015 nuclear deal, a European response to Iran’s breaches of the accord. China and Russia said the move was against international law.
China has also deemed Washington’s Iran sanctions to be illegal. But because the sanctions threaten companies that do business with Iran with penalties that include being locked out of the international financial system, Beijing has been wary of exposing its large firms to sanctions risks. China’s customs authorities haven’t reported any purchases of Iranian crude since 2023.
In addition to targeting Iranian exports of energy products, Washington has imposed sanctions on most Iranian banks, including its central bank, making it extremely difficult to transfer money to Iran.
The hidden workaround
The system through which Iranian crude is exchanged for Chinese-built infrastructure involves two primary players: China’s large state insurance company Sinosure and a China-based financing mechanism that the officials all referred to as Chuxin. The officials pieced together their understanding of the system through financial documents, intelligence assessments and diplomatic channels.
In the arrangement, some of the officials said, an Iranian-controlled company registers the sale of oil to a Chinese buyer controlled by state-owned oil trader Zhuhai Zhenrong, a U.S. sanctions target.
The Chinese buyer, in return, deposits hundreds of millions of dollars each month with Chuxin, officials said. Chuxin then delivers the funds to Chinese contractors that perform engineering work in Iran, in projects whose financing is insured by Sinosure. Sinosure serves as the financial glue that holds the projects together.
Chuxin isn’t named among the nearly 4,300 banking firms registered by China’s top industry regulator, and couldn’t be found on publicly available official lists of financial firms and company registries.
The Iranian crude that reaches China takes an indirect route to mask its origins, involving ship-to-ship transfers and often mixing in oil from other nations, the U.S. government and industry experts say.
Beijing’s underwriter
Sinosure, formally China Export & Credit Insurance, is a financial tool of China’s central government that supports Beijing’s international development priorities—a mandate with particular significance in a politically sensitive location such as Iran.
Sinosure had supported over $9 trillion in trade and investment activities around the world as of the end of last year, according to the company.
In Iran, Chinese infrastructure projects tend to be huge state-directed endeavors, including airports, refineries and transport projects, managed by China’s largest state banks and engineering groups.
China made over $25 billion in financial commitments to build infrastructure in Iran between 2000 and 2023, according to AidData, a research lab at William & Mary in Williamsburg, Va. Sinosure had a direct role in 16 of the 54 documented deals.
The U.S., which has used targeted sanctions against Chinese firms, hasn’t blacklisted companies for doing civilian work in Iran. Nor has it targeted a large Chinese bank.
No documentation in the public domain could be found directly linking Sinosure with the oil-for-construction arrangement in Iran.
In response to questions, China’s Foreign Ministry said that it is unaware of the arrangement, opposes “illegal unilateral sanctions,” and that international law allows for normal cooperation between nations. Zhuhai Zhenrong and Sinosure didn’t respond to requests for comment about the arrangement.
Officials at the Iranian mission to the United Nations didn’t comment on the payment mechanism or on China’s oi
HON BRIAN SCAVO
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