Iran-China trade ...
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One way forward lies in the use of non-dollar currencies. Settlements in Chinese yuan, UAE dirham, Russian ruble, or Indian rupee can largely neutralize dollar-based sanctions. A successful example is the Iran-China agreement to conduct oil transactions in yuan via China’s domestic payment system, Cross-Border Interbank Payment System (CIPS).
Another option is the expansion of barter trade, which reduces the need for currency transfers. Under this system, oil and petrochemical exports can be exchanged directly for Chinese machinery, equipment, and goods.
Strengthening bilateral currency swap agreements and enabling direct rial–yuan settlements without the dollar is also among the practical tools for easing trade. This approach is already in place between China and several Asian countries, including Russia and Pakistan.
Using smaller regional Chinese banks can also help facilitate trade, as unlike major state-owned banks—which are under heavy pressure from sanctions—smaller banks face fewer restrictions and are more willing to engage in non-dollar transactions. The establishment of joint Iran–China financial channels could also prove useful, similar to Europe’s INSTEX mechanism, but based on local currencies and designed specifically for infrastructure projects.
Currently, over 80% of global trade is carried out in dollars and euros. Yet China, by launching the CIPS, is seeking to wean itself off reliance on the dollar.
Iran, in navigating trade under sanctions, can benefit from using the yuan or other regional currencies. This reduces the risk of US tracking and freezing of funds, cuts transaction costs, and enhances Iran’s leverage to sell oil at reduced discounts.