World
Beijing's Ties to Tehran
— 3 mins read
China is bankrolling Iran with a hidden oil trade
China is buying up to 90% of Iran's seaborne oil through a network of hidden tankers and disguised payments, keeping Tehran's economy afloat despite Western sanctions.
Oil is Iran's main source of foreign currency. Sales to China cover an estimated 45% of the Iranian government's budget, according to the US-China Economic and Security Review Commission, a body funded by the US Congress.
How the oil keeps moving
The trade runs through what analysts call a shadow fleet. Ageing tankers switch off their tracking systems, change flags, and transfer crude ship-to-ship in waters off Malaysia and Singapore, according to reporting on the covert trade.
The oil ends up at small independent Chinese refineries known as teapots. Payment often comes not in cash but in Chinese goods and infrastructure, routed through special companies set up to dodge the banking system.
China's official trade figures have recorded almost no Iranian oil imports since 2022. The data from commodities trackers Kpler and Vortexa tells a different story, with shipments running at around 1.4 million barrels a day in 2025.
Rocket fuel and drone parts
The US Treasury has sanctioned Chinese firms for supplying sodium perchlorate, a chemical used to make missile propellant, along with drone components and semiconductors.
The Atlantic Council, a US think tank, has documented Chinese supply chains feeding Iran's missile and drone programmes. Hundreds of China and Hong Kong-linked entities now sit on US sanctions lists.
The blockade did what sanctions could not
Conflict between the US, Israel, and Iran during 2025 and 2026 brought blockades and attacks around the Strait of Hormuz. Iranian oil shipments collapsed, with Chinese imports falling by 48% in some periods to around 500,000 barrels a day.
Sales to China cover an estimated 45% of the Iranian government's budget.
US News reported that the naval blockade stalled Iranian exports in a way years of sanctions never managed. Beijing rode out the squeeze by drawing on stockpiles of more than 1 billion barrels.
Around 20% of the world's traded oil normally passes through the strait. Any prolonged closure feeds through to fuel prices in Britain within weeks, though supply-driven spikes of this kind fade once shipping resumes.
A deal of convenience, not an alliance
China and Iran signed a 25-year partnership in 2021. Sanctions risk has kept big Chinese firms away, leaving barter deals such as a contract to electrify 1,000km of Iranian railway.
There is no defence pact. China joins occasional naval drills with Iran and Russia but has refused any binding military commitment. Officials on both sides describe the relationship as transactional.
The gap in Washington's pressure
The Trump administration has issued more than 1,000 Iran-related sanctions designations, targeting tankers, refineries, and evasion networks, according to the US Treasury. But the Wall Street Journal reported that Washington has so far avoided sanctioning China's major banks, the financial artery of the whole trade.
The oil keeps flowing, tensions around Hormuz continue, and Washington is expected to press Beijing on the trade at the next Trump-Xi summit.
