China has emerged as Iran’s most critical economic lifeline, purchasing the vast majority of its crude oil exports and providing Tehran with tens of billions of dollars in revenue each year. This trade has helped sustain Iran’s government budget, military capabilities, and regional activities even under heavy Western sanctions.
According to data from commodity tracker Kpler, China imported approximately 1.4 million barrels per day of Iranian oil in 2025. That volume represented more than 80% — and in some estimates up to 90% — of Iran’s total oil exports for the year. It was more than double the roughly 650,000 barrels per day China bought in 2017, before the intensification of U.S. “maximum pressure” sanctions.
A decade ago, China accounted for only about 30% of Iran’s oil sales. Today, it absorbs nearly all of it, often at a steep discount of $8–10 per barrel below global benchmarks. Even with those discounts, the purchases generated an estimated $31 billion in revenue for Iran in 2025 alone. Oil income reportedly makes up around 45% of Iran’s government budget, directly supporting state spending that includes funding for the Islamic Revolutionary Guard Corps (IRGC) and associated proxy networks.
A Sophisticated Sanctions-Evasion Network
The scale of this trade would not be possible without an elaborate system designed to bypass U.S. and international sanctions. Chinese buyers, particularly smaller independent “teapot” refineries in Shandong province, have become the primary processors of Iranian crude. These facilities have limited international exposure, reducing the risk of secondary sanctions compared to major state-owned firms like Sinopec.
Oil shipments rely on a shadow fleet of aging tankers that use deceptive practices: ship-to-ship transfers at sea, AIS signal spoofing, flag-hopping, and routing through third countries such as Malaysia or Indonesia to obscure origins. Cargo is frequently mislabeled, with destinations listed as “unknown.”
Payment mechanisms are equally creative. Direct dollar transactions are largely impossible under sanctions, so the two sides have developed workarounds. One prominent arrangement involves oil-for-infrastructure deals, where Iranian oil is delivered to China and, in return, Chinese state-backed companies undertake construction projects in Iran — including airports, refineries, and transport networks. A mechanism linked to China’s export credit insurer Sinosure reportedly facilitated the equivalent of up to $8.4 billion in such payments in 2024.
Transactions often occur outside the traditional SWIFT system, using China’s Cross-Border Interbank Payment System (CIPS), yuan settlements, smaller Chinese banks, front companies in Hong Kong and elsewhere, and barter-like arrangements. U.S. officials and analysts, including those at the Foundation for Defense of Democracies, have described China as Iran’s “chief partner in sanctions evasion.”
From Economic Lifeline to Wartime Support
The deeper implication is that these purchases do more than provide Iran with discounted energy sales — they actively sustain its ability to operate amid conflict and isolation. Revenue from Chinese oil buys has helped Iran weather sanctions, maintain fiscal stability, procure dual-use goods, and fund its military and proxy operations across the region.
Analysts note that without this steady flow of hard currency, Iran’s capacity to sustain prolonged tensions or support aligned groups would be severely diminished. The IRGC is reported to control a significant share of oil export revenues, channeling funds into broader strategic activities.
This relationship is underpinned by the 2021 China-Iran 25-year comprehensive cooperation agreement, which envisions up to $400 billion in Chinese investment across energy, infrastructure, and other sectors in exchange for reliable, discounted Iranian oil supplies. While actual investment levels have lagged behind initial pledges due to sanctions risks, the energy trade has deepened substantially.
Incentives and Broader Context
For China, the arrangement secures a steady supply of affordable crude for its teapot refineries and supports energy security as the world’s largest oil importer. Iranian barrels represent about 13% of China’s seaborne crude imports, fitting into a diversified portfolio that also includes Russia, Saudi Arabia, and others. Beijing has tolerated — and in some views enabled — the sanctions-evasion ecosystem because it aligns with its interest in challenging aspects of the U.S.-dominated financial and energy order.
The trade is not monolithic. Much of the buying is driven by private or semi-private Chinese actors rather than direct central government mandates, though Beijing’s tolerance is clear. The United States has imposed sanctions on specific Chinese refineries, terminals, vessels, and intermediaries, but enforcement has faced persistent gaps.
This dynamic forms part of a larger pattern of sanctions circumvention involving China, Russia, Iran, and other actors building parallel trade and financial networks. While China does not appear to provide direct conventional military support to Iran’s conflicts, the economic relationship has reduced the effectiveness of isolation efforts and supplied Tehran with critical resources during periods of heightened regional tension.
The arrangement highlights the limits of sanctions when a major global economy acts as buyer of last resort. As geopolitical pressures evolve, the China-Iran oil trade remains a key factor shaping both nations’ strategic resilience and the broader international sanctions regime.
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