How China helps Iran beat US sanctions – Oil, banks and shadow tanker network explained

A Wall Street Journal report has revealed that Iran continues to earn billions of dollars every month from oil sales despite the United States’ “maximum pressure” campaign. China has emerged as its biggest buyer, helping Tehran bypass sanctions through a complex network of financial and shipping channels.

China-Iran Relations: During his first term in office, US President Donald Trump pushed a “maximum pressure” policy to cut Iran’s oil exports and limit its main source of income. The aim was to isolate Tehran from the international oil market and reduce its financial strength.

However, reports suggest the country continued selling large volumes of crude oil to China even under strict sanctions. According to the report, purchases from Beijing increased whenever sanctions were tightened. Over time, it has become the main buyer of Iranian oil, compared to about 30 percent of total output a decade ago.

How US sanction was bypassed

Observers say China and Iran have built a system to get around sanctions. Payments are sent through smaller Chinese banks that are not closely linked to the international financial system. Because of this, these banks face less risk from US action.

At the same time, shell companies based in Hong Kong and other locations help manage transactions and move funds. This setup allows Iran to continue earning billions of dollars every year while keeping access to usable funds outside its borders.

Role of China’s “teapot” refineries

A major part of the trade is handled by China’s private refineries, often called “teapots”. These smaller facilities stepped in after state-owned energy firms reduced direct involvement due to concerns over US sanctions.

These refineries pay in yuan (Chinese currency) instead of dollars to keep transactions outside the reach of the US financial system. China has also increased import quotas for such refineries over the years, rising from 140 million metric tons in 2018 to 257 million metric tons now.

Shadow fleet used for oil transport

The report also describes a “shadow fleet” of tankers used to move Iranian oil to China. These ships often turn off tracking systems during transit and transfer oil between vessels at sea to hide its origin.

A China-linked tanker network created in 2019 is said to include at least 56 ships that have transported over 400 million barrels of restricted oil. In many cases, the shipments are relabelled as coming from countries such as Oman or Malaysia.

Banking channels and financial flow

To manage payments, China has used smaller banking institutions, including Bank of Kunlun. The bank was sanctioned by the United States in 2012 for providing services linked to Iranian financial institutions, but it later became an important channel for yuan-based trade with Iran.

By 2022, a large share of Iran’s oil revenue was reportedly routed through this bank. Investigators also point to front companies such as the China Oil and Petroleum Corporation, along with multiple shell firms in Hong Kong that help convert yuan into other currencies used in international trade.

An Israeli intelligence report claims that Iran’s Tejarat Bank runs many front companies in Hong Kong and China. These companies help move money and support funding linked to Iran’s Revolutionary Guard (IRGC).

Oil-for-infrastructure barter system

Along with financial transfers, Iran and China also use a barter system. Under this arrangement, Chinese companies build infrastructure projects in the country in exchange for crude oil supplies.

In 2024, transactions worth around $8.4 billion were settled through this system. This arrangement reduces dependence on banking channels and keeps trade flowing despite restrictions.

Oil flows continue despite regional tensions

Iran has increased control over the Strait of Hormuz and has warned Western-linked shipping routes in the region. At the same time, its own oil shipments to China continue without disruption.

While China does not officially report Iranian oil imports, tracking data from commodity firms suggests imports averaged around 1.4 million barrels per day in 2025. This accounts for more than 80 percent of Iran’s oil exports.

US response and policy limits

The United States has expanded sanctions and taken legal action against several individuals linked to the trade network. However, restrictions on China are limited due to concerns over international oil prices.

Officials worry that tighter measures could reduce international supply and push energy prices higher. It will affect the economy across the world.

Growing economic support for Iran

Analysts say China’s support has helped Iran maintain its energy exports and fund state activities. The financial inflow has also reduced the impact of international pressure on Tehran.

This growing economic link between the two countries has created a system that continues to challenge the effectiveness of sanctions, even as Western governments try to tighten enforcement.