China has quietly built a financial workaround allowing it to keep paying for Iranian oil despite sweeping U.S. sanctions, according to new reporting by The Wall Street Journal.

According to current and former Western officials who spoke with the outlet, the opaque arrangement functions like a barter system: Iranian crude flows to China and in exchange Chinese state-backed firms construct infrastructure projects inside Iran. The system relies on a Chinese state-owned insurer and a shadowy financial conduit to move billions of dollars outside the global banking system, the newspaper said. 

At the heart of the setup are two entities: China Export & Credit Insurance Corp., known as Sinosure, and a little-known financial mechanism called Chuxin, which does not appear on official lists of registered Chinese banks or financial firms.

Under the scheme, Iranian-controlled intermediaries record oil sales to Chinese buyers linked to Zhuhai Zhenrong, a state oil trader already under U.S. sanctions. The Chinese buyers then deposit payments with Chuxin, which channels the money to Chinese construction firms operating in Iran on projects insured by Sinosure.

The system has effectively replaced cash transfers with state-backed work, enabling Iran to finance infrastructure while avoiding the dollar-based financial network. Western officials estimate as much as $8.4 billion in oil-related payments flowed through this conduit last year, the Journal said. 

Sinosure has supported over $9 trillion in trade and investment globally, according to its own disclosures, and has been involved in at least 16 major Iranian projects since 2000, from airports to refineries, according to the news outlet. 

The workaround has provided Iran with an economic lifeline at a time when U.S. sanctions have crippled most of its banks and limited access to global financial markets. Nearly 90% of Iran’s oil exports—worth an estimated $43 billion last year—go to China, despite U.S. efforts to drive those shipments to zero.

“The system shows how far Beijing is willing to go to shield partners like Iran from U.S. sanctions,” one European diplomat briefed on the arrangement told the Journal. “It’s an alternative circuit that Washington can’t easily shut down.”

Read more at The Wall Street Journal