USA tightens the blockade: Iran's oil exports to China come under heavy pressure

US tightens its grip on Iranian oil exports

US authorities are intensifying pressure on Iranian oil exports to China, according to Seeking Alpha. The blockade targets the tight trade corridor between Tehran and Chinese refineries, threatening to sever a supply line that has remained surprisingly resilient despite years of sanctions.

Iran is now almost entirely dependent on the Chinese market to sell its oil. According to available trade data, Chinese importers accounted for more than 80 percent of Iran's total oil exports at the end of 2025 — a dependency that leaves both parties vulnerable to geopolitical pressure.

A sophisticated system for evading sanctions

Despite the sanctions regime, Iran and China have developed a multilayered system to sustain trade outside the dollar-based financial system.

Payments are made primarily in Chinese yuan through smaller banks — such as Bank of Kunlun — and via China's own interbank system CIPS, which allows transactions to be processed without touching the SWIFT network or US correspondent banks. Large state-owned Chinese banks generally stay clear, wary of secondary sanctions.

An even more unorthodox element is a barter mechanism whereby Iranian oil is repaid in the form of Chinese infrastructure construction in Iran. According to Western estimates, around 8.4 billion dollars flowed through this network in 2024 alone — financed via an intermediary structure known as "Chuxin" and insured by China's state export credit agency Sinosure. Infrastructure projects have included airports, refineries, and transport networks.

The dark fleet and "teapot" refineries

On the logistics side, Iran employs a so-called "dark fleet" of tankers that switch off their automatic identification systems (AIS transponders) to avoid tracking. When cargo arrives in China, it is often rebranded as Malawian or Middle Eastern oil to conceal its origin.

Another key actor in this system is China's independent refineries, popularly known as "teapots." These smaller facilities have absorbed an estimated 90 percent of Iran's total oil exports, as the large state-owned Chinese refiners have pulled back out of sanctions compliance concerns.

The petrodollar's foundation is being challenged

The issue has implications far beyond bilateral Iran-China trade. Analysts at Deutsche Bank have, according to available research material, described the development as a test of the "petrodollar regime," particularly following reports that Iran may demand yuan settlement for oil transit through the Strait of Hormuz.

In 2023, China is reported to have saved around 10 billion dollars by purchasing oil from sanctioned countries such as Iran and Russia — illustrating the commercial incentives driving the system forward, regardless of sanctions rhetoric.

Western experts emphasize that these alternative payment channels make it significantly harder to enforce sanctions effectively, as transaction data is not accessible to Western jurisdictions.

The question is how much further the US can tighten the screws

It remains to be seen whether the tightened blockade will succeed where previous attempts have failed. The system Iran and China have built is not improvised — it is the result of years of deliberate financial engineering designed to withstand precisely this kind of pressure.

For global commodity markets, any genuine tightening could mean that around 1.38 million barrels per day might potentially disappear from Chinese supply — which would in turn affect the global oil balance and prices. Norway's oil industry and OSEBX-listed energy companies will be watching developments closely, as a tightening of Iranian supply has historically had a supportive effect on the Brent crude price.