Earlier in the Trump administration, the US launched a “maximum pressure” campaign to cut off Iranian oil from the global market and eliminate Tehran’s largest source of revenue. Today Iran sells billions of dollars worth of oil every month.
For him, it can thank a country: China.
Tehran’s Asian partners have dramatically increased the amount of Iranian oil they buy as sanctions tighten. Iran now consumes almost every drop produced, compared with about 30% a decade ago.
To make those purchases possible, Chinese buyers have worked closely with Iran to create what U.S. officials and researchers say has become one of the world’s largest sanctions-evasion networks.
Payments are routed through smaller Chinese banks, which have limited global operations and would suffer less losses if the US imposed sanctions, making them difficult to stop. Front companies set up by Iran in Hong Kong and elsewhere help manage the income.
Private Chinese refineries, known as “teapots”, have become the primary buyers of Iranian crude after China’s state-owned energy giants, wary of upsetting Washington, left the market. Counterfeit bills and mislabeling of crude oil have further obscured the trade.
All of these steps – described in US sanctions documents, public indictments and by Western officials and researchers – have allowed Iran to earn tens of billions of dollars in revenue from China every year and then launder it so it can be used around the world.
Max Meislich at the Foundation for Defense of Democracies, a Washington-based think tank, said China is Iran’s “key partner in evading sanctions.” “Iran would not be able to fight this war without the support it has received over the years from China.”
In a written response, China’s Foreign Ministry said it firmly opposes “illegal and unreasonable unilateral sanctions” and has previously said it will do whatever it deems necessary to protect its energy security. Behind the scenes, Beijing has been wary of openly violating sanctions, which could draw Washington’s anger and damage its relations with other Gulf countries.
Yet, unlike other countries, China has found Iranian crude irresistible. It needs energy, and it can get oil from Iran at a deep discount after US sanctions scare away other buyers. Buying it in large quantities also defeats American objectives in the Middle East.
The US has tried to rein in the trade, indicting some individuals and expanding sanctions. But rising global oil prices and the risk of destabilizing US-China relations have limited how far it can go in targeting China.
The sanctions relief system has been working continuously since the start of the Iran war, even as Tehran is working effectively closed the strait of hormuz For western shipping. Iran has mined the strait and threatened to attack ships carrying oil from US allies, while tankers loaded with its own products are still headed for Chinese ports.
Officially, China’s customs authorities have not reported any crude oil imports from Iran since 2023, a move researchers say is aimed at reducing political tensions with Washington.
But Kpler, a commodities research firm that tracks tanker movements, estimates China buying about 1.4 million barrels of oil a day from Iran in 2025.
That accounted for more than 80% of Iran’s oil sales last year and more than double the roughly 650,000 barrels a day it purchased in 2017, before President Trump’s maximum pressure campaign began.
maximum pressure
Several years ago, when sanctions against Tehran were less stringent, Chinese state-owned oil companies openly purchased Iranian crude, as did many other buyers around the world.
The Obama administration tightened regulations, making it much more difficult to do business with Iran. Sanctions were then eased after reaching a nuclear deal with Tehran in 2015. Many countries including India, Italy and Greece increased purchases of Iranian oil.
Everything changed when Trump first came to office. He rejected Obama’s nuclear deal and launched his maximum pressure campaign with the toughest sanctions ever, threatening to punish anyone buying or financing Iranian oil.
According to Kpler, Iranian sales dropped from about 2.8 million barrels per day in May 2018 to about 200,000 in August 2019 as buyers pulled out of the market.
But Iran responded quickly – with China’s help.
According to US officials and researchers, Tehran was forced to rethink how it sold its oil, accelerating the creation of a secret trade network. Officials and researchers said it set up oil-selling firms with obscure names such as Sahara Thunder and Sephar Energy and created fake invoices that said Iranian oil was from other countries such as Oman or Malaysia.
US sanctions certainly made life difficult for Tehran, increasing its cost of selling oil and reducing Iranian revenues. But Tehran constantly found a way to sell oil and access the income, ultimately dealing almost entirely with China.
According to Kpler, by the end of 2022, Iran’s exports were to exceed one million barrels per day, with China accounting for the largest share.
One key to making trade possible was expansion shadow fleet of tankers US officials and researchers say the move allowed oil to move between Iran and China.
Tanker operators based in the Middle East, China, and elsewhere practiced creative subterfuge, changing the names of ships, turning off devices signaling their location, and transferring Iranian crude from one ship to another en route to China to conceal its origin.
A China-based tanker network established in 2019 now includes at least 56 ships that have funneled more than 400 million barrels of sanctioned oil, according to C4ADS, a Washington-based nonprofit specializing in national-security threats.
filling the teapot
However, inside China, oil needed buyers.
Iran’s traditional customers, including state-owned giants Sinopec and China National Petroleum Corp, or CNPC, have extensive global operations, meaning they cannot afford to lose access to US financial markets for violating sanctions by buying Iranian oil.
But China also has a network of smaller refineries – so-called teapots – that operate independently of the state-owned energy giants. These companies are less affected by sanctions because they are believed to pay for Iranian oil in yuan rather than dollars.
Beijing gradually increased the amount of oil China could import. Previously, teapots were limited to how much they could bring according to a quota set by the state.
China’s crude-import quota for non-state trade – a measure of how much the teapot sector can import – rose from 140 million metric tons in 2018 to 257 million metric tons this year, according to official Chinese data.
money flows
Chinese buyers still had to figure out how to pay for the oil, as US sanctions strictly limited banks from doing business with Iran.
They turned to smaller Chinese institutions which, like the teapot, had less to lose than China’s largest banks if they were targeted by the US.
US officials say one such bank is Bank of Kunlun, which started in a desert town near China’s border with Kazakhstan before being acquired by Chinese oil major CNPC in 2009.
In 2012, TThey imposed US sanctions on Kunlun Allegedly providing millions of dollars of financial services to Iranian banks, including moving money for them and paying off their letters of credit, effectively cut off Kunlun’s access to the US financial system. This strengthened Kunlun as a preferred option to facilitate trade with Iran in China’s currency.
Financial disclosures show that the bank grew rapidly. According to the US Treasury, a “significant portion” of Iran’s oil revenues were deposited into the institute by 2022.
Bank of Kunlun did not respond to a request for comment through CNPC.
complex deals
The indictments filed in US federal court provide a deeper picture of how US investigators think China-Iran trade works.
In one case, in 2024, U.S. prosecutors alleged that buyers of Iranian crude sometimes directly connected with Iran’s Islamic Revolutionary Guard Corps, negotiating and brokering multimillion-dollar oil deals for the Iranians through a front called China Oil & Petroleum Co.
In one episode described in the indictment, a ship identified as “Oman Pride” picked up Iranian crude off the Sirri Islands in the Persian Gulf. Meanwhile, another boat outside the bay broadcast fake signals pretending to be “Oman Pride”. Later, Iranian oil was offloaded from the real “Oman Pride” and transferred to another ship before being delivered to China.
According to The Wall Street Journal, front companies in Hong Kong and elsewhere have been used to convert Chinese yuan into dollars, euros or other foreign currencies that Iran needs. have reported. According to research by Udi Levi, former head of the economic warfare unit of Israel’s Mossad intelligence agency, an Iranian exchange house, part of a larger financial institution called Bank Tejarat, oversaw 66 major companies in Hong Kong and China.
In some cases, Chinese buyers were not even required to send money for payment.
Instead, they business services arranged Through a barter system in which state-backed Chinese companies in Iran build infrastructure there as compensation for the oil. The Journal previously reported that the equivalent of $8.4 billion in oil payments could flow through this funding vehicle in 2024.
Write to Rory Jones Rory.Jones@wsj.comon brian spegele Brian.Spegele@wsj.com And on Austin Ramsey austin.ramzy@wsj.com
