China and Iran Develop Covert Trade Channel to Evade U.S. Sanctions

China and Iran have established a covert trade mechanism to circumvent U.S. sanctions, enabling Tehran to sell crude oil and procure Chinese goods through a closed barter-like settlement system, Reuters reported, citing anonymous sources.

Operational since at least 2021, the arrangement was first used to deliver COVID-19 vaccines to Iran. Iranian oil revenues are held in Chinese accounts and used to pay for imports ranging from consumer goods to industrial equipment, bypassing the global financial system and dollar transactions.

The structure reflects deepening economic ties amid sustained American pressure. Cut off from international banking, Iran relies on China as its primary oil customer and a critical supplier. Chinese state-owned enterprises and financial institutions manage the flow of goods and funds.

While exact volumes are undisclosed, analysts say the channel handles a significant share of Iran's oil exports. The mechanism highlights the limits of unilateral sanctions when major economies build alternative payment infrastructures.

Sources did not specify current scale or scope expansion. Both governments deny formal barter agreements, though customs data shows a sharp rise in bilateral trade since 2021.