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China’s Alternative Payment Route for Iranian Oil

CNY Trends | October 7, 2025

While U.S. sanctions are designed to cut Tehran off from the global financial system, China has quietly built a separate structure that allows energy trade with Iran to continue. The system effectively trades oil for large-scale construction and infrastructure work inside Iran, operating outside traditional banking channels and beyond Washington’s reach.

Oil for Construction

At the center of this exchange is a closed-loop arrangement that functions like a modernized barter system. Iran sells crude to Chinese state-linked buyers, and instead of wiring cash abroad, the proceeds are retained in China. Those funds are then allocated to Chinese contractors completing airports, refineries, and transport projects in Iran.

Two institutions appear to coordinate the process:

• China Export & Credit Insurance Corporation (Sinosure) — a state insurer that guarantees payments and protects Chinese firms working abroad.
• Chuxin — a little-known Chinese financial platform that reportedly receives deposits from oil sales and channels them into project financing.

Analysts familiar with regional trade flows estimate that billions of dollars—possibly over $8 billion last year alone—circulate through this mechanism. Nearly 90% of Iran’s oil exports are believed to end up in Chinese hands, even though official customs data rarely acknowledges these shipments.

A Network Outside SWIFT

The funding loop avoids SWIFT-based transactions entirely. Iranian oil shipments typically reach China through indirect routes, often using ship-to-ship transfers or mixed cargo to obscure their origin. Once the crude is delivered, payments remain in domestic Chinese accounts, where they are re-purposed for infrastructure projects insured under Sinosure’s umbrella.

Because no U.S.-dollar transactions occur, both nations reduce exposure to sanctions risk while maintaining commercial benefits—China secures energy at a discount, and Iran gains new infrastructure without depleting reserves.

Strategic and Political Layers

The deepening of these financial ties aligns with a broader geopolitical convergence. Beijing and Tehran signed a 25-year cooperation framework in 2021 that prioritizes energy, logistics, and industrial investment. Since then, Chinese-backed projects in Iran have accelerated, including airport expansions and energy processing facilities.

According to open-source development databases, Chinese financing commitments to Iran have surpassed $25 billion since 2000, with many deals supported or insured by Sinosure. The insurer’s role extends beyond commerce—it effectively enables Chinese foreign policy goals through economic engagement in sanctioned markets.

Growing Diplomatic Friction

China’s outreach to Iran comes as Western powers attempt to re-impose certain international sanctions suspended under the 2015 nuclear accord. Beijing maintains that its cooperation with Iran is lawful and denounces unilateral sanctions as violations of international norms. At the same time, the U.S. Treasury continues to target middlemen in the United Arab Emirates and Hong Kong for facilitating Iranian trade flows.

Neither Sinosure nor Chuxin has been directly sanctioned by the U.S., though both are closely watched by Western regulators for potential future designations.

Implications for Global Finance

The durability of this oil-for-infrastructure system demonstrates how major economies can construct parallel financial channels when excluded from Western institutions. For Iran, it provides a survival mechanism under pressure; for China, it cements strategic influence in the Middle East and secures steady energy access at negotiated rates.

The model also signals a broader shift in the global financial architecture—one where the enforcement power of U.S. sanctions may erode as alternative payment ecosystems mature and expand across Eurasia.

Sources: publicly available trade data, policy briefings, and regional development reports. Original coverage link