China Didn't Just Quietly Buy Iran's Oil. It Funded Its Wartime Economy

Iran continues to sell billions of dollars' worth of oil each month despite sweeping US sanctions aimed at cutting off Tehran's largest source of income. A decade ago, China purchased just 30 per cent of Iran's oil. Today, Beijing buys nearly everything Iran produces, which is a shift that has transformed China into Iran's most critical economic partner, according to a report by the Wall Street Journal.

How China Enabled A Global Sanctions-Evasion Machine

Beijing's support did not come through major state-run giants, which avoid Iran to protect their access to US banks. Instead, small independent Chinese refineries, known as "teapots", stepped in as primary buyers. These refineries largely operate in Chinese yuan rather than US dollars, insulating them from Washington's financial pressure.

China gradually loosened import quotas for the teapots, enabling them to absorb even larger volumes of Iranian crude.

A key financial artery in this network is the Bank of Kunlun. Founded in a remote city near the Kazakh border and acquired by oil major CNPC in 2009, the bank became a central channel for Iran-related transactions. 

The US sanctioned Kunlun in 2012 for allegedly providing hundreds of millions of dollars in services to Iranian banks, including moving money and paying letters of credit. The action severed its access to the US financial system but also cemented Kunlun as the preferred bank for Iran-China trade conducted in yuan.

By 2022, the US Treasury reported that Kunlun was receiving a "significant portion" of Iran's oil revenue.

Hong Kong Front Companies And Laundered Money

Alongside China's banking channels, Iran relied heavily on front companies in Hong Kong. These firms helped convert yuan earnings into dollars or euros so the funds could be used abroad. According to research by Udi Levy, a former Mossad economic warfare chief, a single Iranian exchange house tied to Bank Tejarat oversaw 66 such front companies across Hong Kong and China.

This system allowed Iran to earn and spend tens of billions of dollars in oil revenue from China.

Max Meizlish of the Foundation for Defence of Democracies said, "Iran just wouldn't be able to fight this war without the years of support that it has received from China." He also described Beijing as Tehran's "chief partner in sanctions evasion".

Although China's Foreign Ministry insists it opposes "illegal and unreasonable unilateral sanctions", Beijing has also stated it will protect its energy security as it sees fit. Cheap Iranian crude remains too attractive for China to ignore, even as it tries to maintain stable ties with Washington.

A Dilemma For Washington

Meanwhile, the US is currently facing a difficult situation. Targeting major Chinese banks could rattle global oil markets and destabilise the broader US-China relationship, a risk Washington is not ready to take.

During Donald Trump's first term, the "maximum pressure" campaign briefly crippled Iran's exports. Sales plunged from about 2.8 million barrels per day in May 2018 to roughly 200,000 in August 2019, according to Kpler. But China's intervention reversed much of that decline.

China stopped publicly reporting Iranian oil imports in 2023 to lower political friction with the US, yet Kpler estimates it still purchased around 1.4 million barrels per day in 2025.

Iran's Underground Oil Network

Under escalating sanctions, Iran built an extensive covert trading system designed to keep its oil moving. Front companies such as Sahara Thunder and Sepehr Energy handled sales, while falsified invoices masked the crude's origin by claiming it came from countries like Oman or Malaysia.

The sanctions raised Iran's operating costs, but they did not stop the trade. Instead, Iran refined its tactics until nearly all of its shipments funnelled through China.

By late 2022, Iran's exports had climbed back above one million barrels per day, with China taking most of the supply.

Supporting this revival was a vast shadow fleet of tankers. These ships routinely switched off GPS transponders, changed names, and carried out mid-voyage transfers to obscure the oil's origin. A single China-based network created in 2019 has grown to at least 56 ships and has covertly moved more than 400 million barrels of Iranian oil, according to C4ADS.

Inside The Covert Deals: What US Investigations Reveal

US federal indictments provide rare insight into how the Iran-China oil trade functions.

In a 2024 case, American prosecutors alleged that buyers of Iranian crude sometimes dealt directly with Iran's Islamic Revolutionary Guard Corps, executing multimillion-dollar transactions through a front company called China Oil & Petroleum Co.

One episode described a tanker named the "Oman Pride", which loaded Iranian crude on Sirri Island in the Persian Gulf. Meanwhile, another vessel outside the Gulf broadcast fake signals pretending to be "Oman Pride". The real tanker then offloaded its cargo onto another ship before the oil was delivered to China.

China's Barter-For-Oil Deals

Not all transactions involved direct money transfers. In some cases, Chinese buyers relied on barter arrangements: state-backed Chinese firms built infrastructure inside Iran as payment for oil. According to The Wall Street Journal, this system facilitated the equivalent of up to $8.4 billion in oil payments in 2024.