How a billion-dollar sanctions dodge kept Chinese goods flowing to Iran

Reuters could find no record of a financial institution called ChuXin in Chinese company registries or of the firms said to be acting on behalf of China’s commerce ministry and Iran’s central bank. One source said ChuXin might only exist on a spreadsheet. Companies with the same names as those said to be acting on behalf of the National Iranian Oil Company (NIOC) and Zhuhai Zhenrong are listed in the Hong Kong companies registry, but Reuters could find no public records of their ownership structure or business dealings. Neither responded to questions delivered to their registered addresses, which are in offices belonging to secretarial services companies. The mechanism described to Reuters has been in place since at least 2021 and was first used to supply medicines and COVID-19 vaccines to Iran, three sources said. As Washington has stepped up pressure on companies that do business with Iran, it has become increasingly important for trade, they said. They estimated that between **$2 billion and $2.5 billion** flowed through the SPV over the last year. China is using such arrangements to push back against the U.S. and show it cannot be coerced with the threat of secondary sanctions, said Andrea Ghiselli, an international politics lecturer at the University of Exeter who studies Beijing’s relations with the Middle East. But he said China’s leaders do not want their banks or companies excluded from the international financial system. “**They want plausible deniability.**” Decades of U.S. sanctions have left Iran with few oil customers. China is the main buyer, accounting for more than 80% of Iran’s shipped oil in 2025, or an average 1.4 million barrels per day, according to commodities data and analytics firm Kpler. In 2021, the two countries signed a 25-year strategic partnership accord covering sectors such as energy and infrastructure, but public details remain scarce. The arrangement described to Reuters is one of a number of mechanisms through which Iran purchases goods and services from China without paying Chinese companies directly through international banking channels, three of the sources said. A Western official and two other people familiar with the matter said a buyer acting on behalf of Chinese state-owned oil trader Zhuhai Zhenrong was at least until this year depositing hundreds of millions of dollars a month with an obscure, China-based financial entity known as ChuXin. The deposits covered purchases agreed with a Hong Kong-registered company linked to Iran’s national oil company, the people said, citing material gathered by intelligence agencies. ChuXin would then send funds to Chinese exporters and companies that build infrastructure in Iran, likely via other Chinese financial institutions. Roughly 70% of the Iranian oil proceeds handled by ChuXin are allocated to infrastructure projects, the three sources said, an arrangement first reported by the Wall Street Journal last October. The rest go into accounts belonging to a special purpose vehicle (SPV) used to pay companies that supply goods to Iran. The Iranian sources, who are close to the country’s decision-making circle, confirmed the existence of the SPV, which has not previously been reported. All five sources said funds in the SPV are managed by two entities: a firm acting on behalf of China’s Ministry of Commerce and one linked to Iran’s central bank. The Iran-linked firm notifies the Chinese one when Iran’s central bank authorizes importers to access funds in the SPV so payments can be sent to the suppliers, three said. * Sources estimate **$2 billion to $2.5 billion** passed through a special purpose vehicle over the last year. * Iran used the mechanism to buy **medicine, vehicles and military gear**, they say. * China’s foreign ministry says it is **not aware** of the arrangement. PARIS, Sept 10 (Reuters) - Iran has used a barter-like arrangement to bypass sanctions on its oil sales and buy billions of dollars’ worth of goods from China, including military gear, two senior Iranian sources and three other people familiar with the matter told Reuters. The secretive trade mechanism, in which Iranian oil is exchanged for credits for Chinese imports, has provided a financial lifeline for Tehran in recent years as the United States stepped up economic and military pressure over its nuclear program, according to the sources, who spoke on condition of anonymity. It has also helped China, the world’s biggest crude importer, retain access to discounted Iranian oil while shielding banks and companies that export to the Islamic Republic from international scrutiny or penalties, they said. The U.S. has imposed sanctions on some smaller Chinese entities that buy or facilitate shipments of Iranian oil but has stopped short of the most punishing measures that could have repercussions on the global economy.

How a billion-dollar sanctions dodge kept Chinese goods flowing to Iran

Plausible deniability and wider implications

How the mechanism avoids international banking channels

China pays for Iranian oil with credits for Chinese goods, sources say

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