How China secretly pays Iran for oil and avoids U.S. sanctions

Hidden arrangement secured by prominent Chinese insurer connects Tehran with its biggest customer

- Laurence Norman & James T. Areddy

U.S. sanctions make it nearly impossible to pay Iran for its oil. China has figured out how to do it anyway, in an arrangement that has largely been secret.

The hidden funding conduit has deepened economic ties between the two U.S. rivals in defiance of Washington’s efforts to isolate Iran.

The barter-like system works like this, according to current and former officials from several Western countries, including the U.S.: Iranian oil is shipped to China—Tehran’s biggest customer—and, in return, state-backed Chinese companies build infrastructure in Iran.

Completing the loop, the officials say, are a Chinese state-owned insurer that calls itself the world's largest export-credit agency and a Chinese financial entity that is so secretive that its name couldn't be found on any public list of Chinese banks or financial firms.

The arrangement, by sidestepping the international banking system, has provided a lifeline to Iran’s sanctions-squeezed economy. Up to $8.4 billion in oil payments flowed through the funding conduit last year to finance Chinese work on large infrastructure projects in Iran, according to some of the officials.

Iran exported $43 billion of mainly crude oil last year, according to estimates by the U.S. Energy Information Administration. Western officials estimate that around 90% of those exports go to China.

China has been the predominant buyer of Iranian oil since 2018, when President Trump pulled the U.S. out of the 2015 nuclear accord and reimposed U.S. sanctions.

Two weeks after returning to office, Trump ordered the use of “maximum pressure” to force Tehran to curb its nuclear program and end support for allied militia groups. The directive sought to drive Iranian oil exports to zero.

Since then, the U.S. has imposed sanctions on Chinese individuals and small entities, but Iranian exports to China have continued largely unabated.