By Rory Jones, Brian Spegele and Austin Ramzy
In the first Trump administration, the U.S. launched a "maximum pressure" campaign to cut Iranian oil from the global market and eliminate Tehran's biggest source of revenue. Today, Iran sells billions of dollars worth of oil every month.
For that, it can thank one country: China.
Tehran's Asian partner has dramatically increased the amount of Iranian oil it buys as sanctions have gotten tighter. It now takes nearly every drop Iran produces, compared with around 30% a decade ago.
To make those purchases possible, Chinese buyers have worked closely with Iran to expand 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 that have limited global operations and less to lose if they are sanctioned by the U.S., making it hard to stop them. Front companies established by Iran in Hong Kong and elsewhere help manage the proceeds.
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. Fake invoices and mislabeled crude have further disguised the trade.
All these moves -- laid out in U.S. sanctions documents, public indictments and described by Western officials and researchers -- have allowed Iran to earn tens of billions of dollars in revenue every year from China, and then launder it so it can be used around the world.
China is Iran's "chief partner in sanctions evasion," said Max Meizlish at the Foundation for Defense of Democracies, a Washington-based think tank. "Iran just wouldn't be able to fight this war without the years of support that it has received from China."
In a written response, China's Foreign Ministry said it firmly opposes "illegal and unreasonable unilateral sanctions," and it has previously said it would do what it sees as necessary to protect its energy security. Behind the scenes, Beijing has been wary of being seen to openly violate sanctions, which could provoke Washington's wrath and damage its relations with other Gulf states.
Still, unlike other nations, China has continued to find Iranian crude irresistible. It needs the energy, and it can get Iran's oil at a sharp discount after U.S. sanctions scared off other buyers. Buying a lot of it also frustrates U.S. objectives in the Middle East.
The U.S. has tried to rein in the trade, indicting some individuals and expanding the sanctions. But it has been limited in how far it can go in targeting China by the risk of sending global oil prices higher and destabilizing U.S.-China ties.
The sanctions-busting system has continued to function since the Iran war began, even as Tehran has effectively closed the Strait of Hormuz to Western shipping. Iran has mined the strait and threatened attacks on ships carrying oil from U.S. allies, while tankers laden with its own products still sail toward Chinese ports.
Officially, China's customs authorities haven't reported any crude imports from Iran from 2023 onward, which researchers say is intended to reduce political tensions with Washington.
But Kpler, a commodity research firm that tracks tanker movements, estimates China bought roughly 1.4 million barrels of oil a day from Iran in 2025.
That was more than 80% of Iran's oil sales last year and more than double the roughly 650,000 barrels a day it bought in 2017, before President Trump's maximum pressure campaign began.
Maximum pressure
Many years ago, when sanctions against Tehran were less strict, Chinese state-owned oil companies openly purchased Iranian crude, as did many other buyers around the world.
The Obama administration tightened the rules, making it much tougher to do business with Iran. It then eased sanctions after reaching a nuclear accord with Tehran in 2015. Numerous countries, including India, Italy and Greece, stepped up their purchases of Iranian oil.
Everything changed when Trump first came into office. He threw out the Obama nuclear accord and launched his maximum-pressure campaign with the toughest sanctions yet, threatening to punish anyone who bought or financed the purchase of Iranian oil.
Iranian sales plummeted from nearly 2.8 million barrels a day in May 2018 to roughly 200,000 in August 2019, according to Kpler, as buyers dropped out of the market.
But Iran was quick to respond -- with China's help.
Forced to rethink how it sold its oil, Tehran accelerated the build-out of a clandestine trading network, according to U.S. officials and researchers. It set up oil-sales firms with obscure names such as Sahara Thunder and Sepehr Energy and created fictitious invoices stating Iranian oil was from other nations such as Oman or Malaysia, the officials and researchers said.
The U.S. sanctions certainly made life harder for Tehran, increasing the cost of selling its oil, and reducing Iranian revenues. But Tehran consistently found a way to sell oil and access the proceeds, eventually dealing almost entirely with China.
By the end of 2022, Iran's exports had picked up to more than a million barrels a day, with China making up the biggest chunk, according to Kpler.
One key to making the trade possible was the expansion of a shadow fleet of tankers to move sanctioned oil between Iran and China, U.S. officials and researchers say.
Tanker operators based across the Middle East, China and elsewhere practiced creative subterfuge, changing the names of vessels, turning off equipment signaling their positions, and transferring Iranian crude from one ship to another while en route to China to disguise its origin.
One China-based tanker network, established in 2019, now comprises at least 56 vessels that have funneled more than 400 million barrels of sanctioned oil, according to C4ADS, a Washington-based nonprofit that specializes in national-security threats.
Filling the 'teapots'
Inside China, however, the oil needed buyers.
Iran's traditional customers, including state-owned giants Sinopec and China National Petroleum Corp., or CNPC, have extensive global operations, which meant they couldn't afford to lose access to U.S. financial markets for violating sanctions buying Iranian oil.
But China also has a network of smaller refineries -- the so-called teapots -- which operate independently of the state-owned energy giants. These companies are less exposed to sanctions because they are thought to pay for oil from Iran using yuan instead of dollars.
Beijing gradually increased the amount of oil the teapots could import. Previously, the teapots were limited in how much they could bring in by quotas set by the state.
China's crude-import quota for nonstate trade -- a measure of how much the teapot sector can import -- grew 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, because U.S. sanctions strictly limited banks from doing business with Iran.
They turned to smaller Chinese institutions that, like the teapots, had less to lose than China's biggest banks if they were targeted by the U.S.
One such bank, U.S. officials say, is the Bank of Kunlun, which got its start in a desert city near China's border with Kazakhstan, before being taken over by the Chinese oil major CNPC in 2009.
In 2012, t he U.S. sanctioned Kunlun for allegedly providing hundreds of millions of dollars of financial services to Iranian banks, including moving money for them and paying their letters of credit, effectively cutting off Kunlun's access to the U.S. financial system. That only solidified Kunlun as a go-to choice for facilitating trade with Iran in China's currency.
The bank grew rapidly, financial disclosures show. A "significant portion" of Iran's oil revenue was deposited at the institution as of 2022, according to the U.S. Treasury.
Bank of Kunlun didn't respond to a request for comment through CNPC.
Complex deals
Indictments filed in U.S. federal court provide a deeper picture of how American investigators think the China-Iran trade works.
In one case, in 2024, U.S. prosecutors alleged that buyers of Iranian crude at times engaged directly with Iran's Islamic Revolutionary Guard Corps, negotiating and carrying out multimillion-dollar oil deals through a front for the Iranians called China Oil & Petroleum Co.
In an episode described in the indictment, a ship identified as the "Oman Pride" picked up Iranian crude on Sirri Island in the Persian Gulf. Another boat outside the Gulf, meanwhile, transmitted fake signals pretending to be the "Oman Pride." Later, the Iranian oil was unloaded from the real "Oman Pride" and transferred to another vessel before being delivered to China.
Front companies in Hong Kong and elsewhere have been used to convert Chinese yuan into dollars, euros or other foreign currencies Iran needs, The Wall Street Journal has reported. One Iranian exchange house, part of a large financial institution called Bank Tejarat, oversaw 66 front companies in Hong Kong and China, according to research by Udi Levy, the former head of the economic warfare unit of Israel's Mossad intelligence agency.
In some cases, Chinese buyers didn't even need to send money for payment.
Instead, they arranged to trade services through a barter system in which state-backed Chinese companies in Iran build infrastructure there as compensation for oil. Up to the equivalent $8.4 billion in oil payments flowed through this funding conduit in 2024, the Journal previously reported.
Write to Rory Jones at Rory.Jones@wsj.com, Brian Spegele at Brian.Spegele@wsj.com and Austin Ramzy at austin.ramzy@wsj.com
(END) Dow Jones Newswires
April 06, 2026 23:00 ET (03:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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