China's Sanctions Dodge: $2 Billion Bartered Away on Iranian Goods

A secret trade mechanism has allowed Iran to bypass US sanctions and buy billions of dollars' worth of goods from China, including military gear. The arrangement involves Chinese companies being paid with credits for Iranian oil, which is then used to purchase goods such as medicine, vehicles, and communication equipment. This barter-like system has been in place since at least 2021 and has provided a financial lifeline for Tehran as the US stepped up economic and military pressure over its nuclear program.

The mechanism was also used to supply Iran with air defense equipment worth millions of dollars, according to sources familiar with the matter. The arrangement has helped China retain access to discounted Iranian oil while shielding banks and companies that export to the Islamic Republic from international scrutiny or penalties.

US Secretary of the Treasury Scott Bessent warned countries in August to cut business ties with Iran or risk being forced out of the dollar-based financial system. The US has imposed sanctions on some smaller Chinese entities that buy or facilitate shipments of Iranian oil, but has stopped short of the most punishing measures that could have repercussions on the global economy.