The American strategy of applying economic pressure on Iran is hitting a major obstacle: a global shift to using the Chinese yuan. While the White House holds talks on a new nuclear deal and promises Iran sanctions relief and access to some of its frozen assets, Tehran and Beijing are building a financial workaround that lets Iran continue exporting oil and bringing in billions without going through the U.S.-controlled banking system, the Wall Street Journal reported Wednesday.
3+American control, which previously relied on most trade transactions passing through U.S. banks—allowing Washington to monitor and block users—is eroding. Josh Lipsky of the Atlantic Council explains: “All yuan-based systems make it easier to circumvent American sanctions. They obscure the ability of the U.S. intelligence community to see financial flows.” The yuan’s share of global trade has tripled over the past five years to 6% in April, making it the second most-used currency in trade finance, ahead of the euro.
The on-the-ground implications are dramatic: Iran brought in about $43 billion from oil revenues in 2024, most of it paid in yuan. In many cases, Chinese buyers deposit payment with an entity called “Chuxin,” which transfers the funds to Chinese contractors carrying out engineering projects in Iran—like airports and refineries—avoiding direct money transfers.
3+In other cases, barter deals are executed, like the Chinese city of Ningbo trading auto parts for Iranian pistachios. Iran also operates a fleet of “shadow ships” that transport oil to China while turning off tracking devices to disguise the cargo’s origin.
Technology systems have become central to the battle. China’s CIPS system and the mBridge initiative, which uses blockchain to transfer digital versions of currencies without passing through U.S. banks, are key tools. Additionally, Beijing allowed digital yuan held in Chinese banks to earn interest starting in January, making it attractive to trading partners.
3+Meanwhile, the White House temporarily authorized Iran to sell oil and even receive payments in dollars as part of an effort to reach a nuclear deal, despite official sanctions. Iran for its part has been forced to sell its oil at average discounts of about 13% below market price.
The United Arab Emirates, a U.S. ally, has signaled that if it suffers from dollar shortages due to regional tensions, it may be forced to use yuan for oil transactions. Beijing for its part says it is unaware of the specific oil trade and that its relations with countries are conducted within the framework of international law.
3+It all started after the 2008 financial crisis, when China began accumulating yuan reserves and reducing dependence on the dollar. In 2015, the CIPS system was launched, and in 2018, yuan-denominated oil contracts were launched on the Shanghai exchange. In March 2021, Iran and China signed a 25-year strategic partnership to deepen their ties as a “protective wall” against external pressures. The war in Ukraine that began in 2022 and sanctions on Russia accelerated the trend, with Russian-Chinese trade conducted mostly in yuan and rubles.
China’s goal isn’t to replace the dollar but to build “trade routes” that bypass the U.S. to insulate its economy from economic attacks, as happened to Russia and Iran, and perhaps as might happen if it acts on Taiwan. The Trump administration is aware of the gap that has opened and is trying to respond with sanctions on Chinese refineries and banks, but China’s central bank governor has already made clear that the shift away from the dollar world is necessary because of America’s tendency to use its currency as a weapon. The implication of the report’s findings is that state systems need fundamental fixes to ensure proper management in the face of a changing global financial reality.