Iran has established a covert financial mechanism to maintain billions of dollars in trade with China despite strict US sanctions, according to a special Reuters report.
Under the arrangement, Iran supplies crude oil to Chinese buyers and receives essential Chinese goods in return, including medicines, vehicles, communications equipment and other supplies, without relying directly on the international banking system.
According to Reuters, Chinese buyers deposit payments for Iranian oil into a special-purpose vehicle (SPV) rather than transferring the money directly to Iran. Iran can then use the credit held in the fund to pay Chinese suppliers.
The system is estimated to have facilitated between $2 billion and $2.5 billion in trade over the past year. Reuters also reported that the mechanism was used for contracts involving hundreds of millions of dollars worth of air-defense equipment, as well as medicines and communications equipment.
The system reportedly began during the COVID-19 pandemic to facilitate the supply of vaccines and medicines but has since expanded into a broader channel for meeting Iran’s civilian and defense needs.
China remains Iran’s biggest oil customer, purchasing more than 80% of Iran’s oil in 2025, according to the report. The arrangement allows Beijing to obtain cheaper Iranian crude while attempting to shield its major banks from direct exposure to US sanctions.
The United States, meanwhile, is continuing to increase financial pressure on Tehran and working with European and other allies to restrict the resources available to Iran’s nuclear ambitions.
