China Is Supercharging Iran’s Sanctions Evasion Strategy

Beijing has become the central engine of Iran’s sanctions evasion strategy. For years, China has been the top buyer of Iranian oil and other sanctioned goods — purchasing approximately 90 percent of Iran’s exported oil and 25 percent of its non-oil goods — but little is known about how this illicit trade is financed. Moreover, as major Chinese banks have reduced exposure to Iran over sanctions concerns, questions about how broader Sino-Iranian commerce functions have gone largely unanswered.

New reports from The Wall Street Journal and Bloomberg published on October 5 begin to fill that gap. They expose two pillars of Iran’s sanctions evasion ecosystem: a covert oil-for-infrastructure payment network and a sophisticated barter system centered on Iran’s sanctioned auto and metal sectors. Together, they reveal how China is quietly building parallel financial systems that sidestep U.S. sanctions and let Iran sustain oil exports, import critical goods, and deepen its economic integration with Beijing.

China’s Hidden Oil Payment System

The Wall Street Journal uncovered a covert payment architecture that funnels billions from Beijing to Tehran for crude oil purchases outside the U.S.-led financial system. The scheme revolves around Sinosure, China’s state-owned export credit insurer, and Chuxin, an opaque financial conduit absent from China’s list of registered banks.

Under this arrangement, companies tied to U.S.-sanctioned trader Zhuhai Zhenrong ship Iranian oil to China. Chinese buyers deposit payments with Chuxin, which then transfers funds to Chinese contractors working on infrastructure projects in Iran insured by Sinosure.

Western officials estimate that roughly $8.4 billion in oil payments flowed through this network in 2024, financing projects from airports and refineries to transportation networks. The model mirrors China’s oil-for-loans framework in Iraq, where Sinosure-backed lending underwrites construction in exchange for long-term oil supplies. This may explain why the Central Bank of Iran’s foreign liabilities have grown under sanctions, as Tehran may be using oil revenue as collateral to secure Chinese loans and credit lines.

The Cars-for-Metals Barter Network

Complementing the oil-for-infrastructure model, Bloomberg revealed that major Chinese automakers and metals firms — particularly Chery Automobile Co. and Tongling Nonferrous Metals Group Holdings — operate a barter system with Iran to bypass traditional banking channels.

Chinese firms export “semi-knocked-down” car kits to Iran, where local firms assemble them into finished vehicles. Instead of cash, Chinese companies accept shipments of Iranian copper and zinc, which Tongling and other intermediaries resell. Meanwhile, China’s Dongfeng, Chery, and JAC all work with Iranian car manufacturers as local partners. With China as its top customer, Iran exported $6.1 billion of industrial metals globally in 2023, including $1.6 billion of copper and $900 million of aluminum.

Though modest compared to China’s $19 billion in exports to Iran between April 2024 and March 2025, the several hundred million dollars exchanged through this barter trade illustrate a growing fragmentation of the global financial order. Subnational, state-owned actors in China’s industrial heartland actively sustain sanctions evasion. Chery and Tongling enjoy strong backing from provincial and municipal governments despite U.S. sanctions on Iran’s auto and metal sectors.

A Stronger U.S. Response Is Needed

Curbing Sino-Iranian trade depends on rigorous enforcement. Washington’s core task is to dismantle the logistical and financial networks allowing Iran to disguise and export oil, petrochemicals, and metals and import capital and intermediate goods. Enforcement must begin at sea with the United States and its allies more quickly identifying and sanctioning “shadow fleet” vessels. This should be paired with sanctions on ports and terminals that knowingly process Iranian cargo. A U.S.-led naval coalition should also inspect and potentially detain reflagged “shadow fleet” vessels under the auspices of the Proliferation Security Initiative and sanction the insurers and shippers behind them. Chinese refiners, trading houses, and intermediaries involved in these transactions must also be sanctioned.

The same applies to petrochemical brokers and metal exporters linked to the Islamic Revolutionary Guard Corps. Chinese automakers and suppliers operating in Iran’s sanctioned sectors should themselves face U.S. financial sanctions and export restrictions.

Max Meizlish is a senior research analyst for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Saeed Ghasseminejad is a senior Iran and financial economics advisor. For more analysis from the authors and FDD, please subscribe HERE. Follow Max and Saeed on X @maxmeizlish and @SGhasseminejad. Follow FDD on X @FDD, @FDD_CEFP, and @FDD_Iran. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.