The Barrel is My Friend: A Necessary Deal for Iran and a Calculated Profit for China

The economic relationship between China and Iran does not reveal itself solely through official trade data. Behind the import and export figures operates a more complex system that includes Iranian crude sold at discounts in exchange for the risks of sanctions, transport, and insurance. On the other side, there is a wide Chinese market, goods, equipment, and credit and settlement channels that help Tehran mitigate part of its financial isolation.

These channels helped sustain trade despite sanctions, but they made it more sensitive to legal and logistical risks. Therefore, China does not provide Iran with full and open access to its market and financial sector; instead, it accommodates oil to a large extent through less transparent arrangements that can be scaled back if the cost of sanctions, insurance, or transport rises.

Reuters quoted sources described as "exposed" saying that between $2 billion and $2.5 billion passed through a special‑purpose entity within this mechanism during 2025, and that about 70% of the funds managed through this arrangement were allocated, according to those sources, to infrastructure projects, while the rest was directed to pay suppliers of goods destined for Iran. The report noted that purchases included pharmaceuticals, vehicles, and communications equipment.

On April 28, 2026, the U.S. Treasury warned financial institutions about the risks of dealing with independent Chinese refineries that import and refine Iranian crude, calling for tighter scrutiny of transactions involving those companies, and reaffirming its readiness to use secondary sanctions against foreign financial institutions that continue to support sanctions‑targeted Iranian activities.

However, Energy Information Administration data show that the decline was not only linked to Iranian oil; the largest drops in maritime supplies heading to China between the first and second quarters of 2026 came from Iraq, Russia, and the UAE, while pipeline supplies remained more stable. Chinese imports fell more than the decline in its refinery output, indicating that it drew from inventories to cover part of the gap.

The limits of Chinese economic support for Iran cannot be understood without comparing its position with other Beijing partners in the region. According to estimates from the U.S. Chinese Review Committee, bilateral trade between China and Saudi Arabia was about $108 billion in 2025, and with the UAE about $108 billion, versus a relationship with Iran valued at $41.2 billion when adding unreported oil to official trade.