Recent information disclosed by insiders revealed that in recent years, Iran has been using a secret mechanism similar to a “barter trade” to convert its oil revenues into payments for purchasing Chinese goods, thereby circumventing sanctions. It is estimated that approximately $2 billion to $2.5 billion has flowed through this mechanism over the past year, with at least one transaction possibly related to a multi-million dollar contract for air defense equipment.
On Thursday, two high-ranking Iranian officials and three informed sources informed Reuters that this arrangement allows Iran to use proceeds from oil sales to buy Chinese pharmaceuticals, vehicles, communication equipment, and other goods, while reducing direct funds entering the international banking system.
However, the sources did not disclose the details of the transactions, and Reuters was unable to independently verify whether these transactions actually took place.
According to Reuters’ investigation, a buyer representing Chinese state-owned oil trader Zhuhai Zhenrong has been depositing hundreds of millions of dollars per month into a financial entity named “ChuXin” located in China until at least this year.
The sources stated that these funds are used for procurement agreements with a company in Hong Kong registered with and linked to the National Iranian Oil Company.
Subsequently, ChuXin will make payments to Chinese exporters and Chinese companies involved in infrastructure projects in Iran.
Previously, The Wall Street Journal had disclosed in October 2025 that “ChuXin,” an unidentified financial entity based in China, was used to receive payments related to Iranian oil and then disburse funds to Chinese companies involved in projects in Iran.
Reuters pointed out that approximately 70% of the Iranian oil revenues are allocated to infrastructure projects, while the remainder flows into a Special Purpose Vehicle (SPV) used to pay Chinese companies supplying goods to Iran.
Five sources indicated that the SPV funds are managed by two entities, one representing China’s Ministry of Commerce, and the other linked to the Central Bank of Iran.
When the Central Bank of Iran approves the use of SPV funds by importers, entities in Iran notify their Chinese counterparts, who then make payments to the suppliers.
However, Reuters noted that there is no record of a financial institution named “ChuXin” in Chinese corporate registration data, nor could the entities allegedly representing China’s Ministry of Commerce and the Central Bank of Iran be identified.
One source even suggested that ChuXin may exist “only on a spreadsheet.”
In response to queries from Reuters, the Chinese Foreign Ministry stated that they were “unaware of the situation described by you” and reiterated that China consistently opposes unilateral sanctions that lack international legal basis and are not authorized by the United Nations Security Council.
In a June investigation, The Wall Street Journal pointed out that in recent years, Iran has increasingly used the Chinese yuan and China’s financial system to conduct transactions, reducing reliance on the U.S. dollar and American banking system.
The U.S. dollar has long dominated global financial transactions, with most dollar-denominated cross-border payments having to go through U.S. banks for settlement. Consequently, the U.S. can monitor such transactions and restrict entities subject to sanctions from using the dollar through financial sanctions.
As of 2015, Beijing has established the Cross-Border Interbank Payment System (CIPS) for the yuan as an alternative cross-border payment and messaging channel beyond the SWIFT system. While not entirely separate from SWIFT, CIPS allows for some yuan transactions to bypass U.S. financial institutions.
The Wall Street Journal cited current and former Western officials stating that Chinese oil buyers often do not directly transfer yuan payments to Tehran. Instead, they keep the funds in China and use them to pay Chinese contractors to build facilities like airports and refineries in Iran; some funds are also used through SPV to pay Chinese exporters who then ship goods like auto parts to Iran.
Analysts believe that Beijing’s aim is not to completely replace the U.S. dollar but to establish trade channels that are less directly influenced by the U.S. financial system.
Andrea Ghiselli, a scholar at the University of Exeter in the UK who studies China-Middle East relations, told Reuters that China wants to signal that it will not be coerced by the threat of secondary U.S. sanctions while also avoiding Chinese banks or companies being excluded from the international financial system.
“They want to maintain plausible deniability,” Ghiselli said.
According to data from Kpler, over 80% of Iran’s seaborne oil exports in 2025 were destined for China, averaging around 1.4 million barrels per day.
Reuters noted that this barter-style trading mechanism has been operational at least since 2021, initially focused on pharmaceuticals and COVID-19 vaccines. With Washington intensifying economic pressure in recent years, this mechanism has become increasingly crucial for Iran.