Reports Detail China's Covert Networks Aiding Iran in Sanctions Evasion

Covert Networks Facilitate Billions in Trade

Recent reports have shed light on how China is allegedly assisting Iran in circumventing international sanctions through sophisticated, covert economic networks. These mechanisms primarily involve an 'oil-for-infrastructure' payment system and a 'metals-for-cars' barter arrangement, allowing Tehran to sustain vital trade and receive significant infrastructure development despite global restrictions.

The revelations indicate that Beijing has become a central component of Iran's sanctions evasion strategy, enabling the flow of billions of dollars outside traditional financial systems.

The Oil-for-Infrastructure Payment System

One of the primary methods identified is a covert payment architecture that funnels funds from Beijing to Tehran for crude oil purchases. This system operates outside the U.S.-led financial system and involves several key entities. Companies linked to the U.S.-sanctioned trader Zhuhai Zhenrong reportedly ship Iranian oil to China. Chinese buyers then deposit payments with Chuxin, an opaque financial conduit not listed among China's registered banks.

These funds are subsequently transferred to Chinese contractors engaged in infrastructure projects within Iran, with these projects insured by Sinosure, China's state-owned export credit insurer. Western officials estimate that approximately $8.4 billion in oil payments flowed through this network in 2024, financing critical projects such as airports, refineries, and transportation networks in Iran. This arrangement allows Iran to receive tangible infrastructure development in exchange for its oil, bypassing direct cash transactions.

Metals-for-Cars Barter and Export Scale

Complementing the oil-for-infrastructure model is a sophisticated barter system centered on Iran's sanctioned auto and metal sectors. Major Chinese automakers, including Chery Automobile Co., Dongfeng, and JAC, along with metals firms like Tongling Nonferrous Metals Group Holdings, are reportedly involved in this arrangement. Through this network, Iran exported $6.1 billion of industrial metals globally in 2023, including $1.6 billion of copper and $900 million of aluminum. This barter trade is estimated to involve several hundred million dollars.

China remains the dominant buyer of Iranian oil, purchasing approximately 90 percent of Iran's exported crude. Iranian oil exports reached a multiyear peak, averaging around 1.43 million barrels per day (bpd) in 2025, with some estimates placing May 2023 exports at 1.6 million bpd. Evasion tactics include the use of 'ghost tankers' that disable GPS, ship-to-ship transfers, and rebranding Iranian oil as originating from Malaysia to obscure its true source.

U.S. Response and China's Stance

In response to these evasion efforts, the United States has intensified its 'maximum pressure' campaign against Iran. The U.S. Treasury Department and State Department have imposed sanctions on dozens of individuals, companies, and ships linked to Iran's oil sector, including several Chinese entities. Notably, Chinese 'teapot' refineries like Shandong Jincheng Petrochemical Group Co. and the Rizhao Shihua Crude Oil Terminal at Lanshan Port have been targeted for their involvement in handling millions of barrels of Iranian oil.

These actions mark the fourth set of sanctions specifically targeting China-based refineries since President Donald Trump's return to office in January. U.S. officials assert that these measures aim to degrade Iran's cash flow and dismantle its energy export infrastructure.

For its part, China's Foreign Ministry has stated it was 'unaware' of the specific barter arrangements and 'opposes illegal unilateral sanctions.' China has also developed alternative payment systems, including cross-border yuan settlement mechanisms and barter arrangements, to facilitate trade with sanctioned countries. This economic cooperation is further underpinned by a 25-year strategic pact signed between China and Iran in March 2021.