September 11th, 2026: Iran’s Hidden China Trade Network Just Got Exposed & Ukraine Strikes Russia’s Arctic Gas Hub

Mike Baker (0:12)

It's Friday, the 11th of September, the 25th anniversary of 9-11.

Welcome to The President's Daily Brief. I'm Mike Baker, your eyes and ears on the world stage. All right, let's get briefed. First up, Reuters reveals how Iran used a billion-dollar barter system with China to maintain a sanctions-busting steady trade of Iranian oil for Chinese goods, including military equipment. Later in the show, British, Norwegian and American forces disrupted a secret Russian submarine operation reportedly aimed at crippling NATO's undersea infrastructure. Plus, Ukrainian drones are hitting Russia from the Arctic to the Black Sea, targeting key gas infrastructure and striking the resort city of Sochi. In today's Back of the Brief, the long-running US case against Huawei has finally reached trial, with federal prosecutors accusing the Chinese tech giant of stealing American technology and operating as a criminal enterprise. But first, today's PDB spotlight.

Iran reportedly found a way to turn sanctioned oil into billions of dollars worth of Chinese goods without sending the money through the international banking system. And according to a new Reuters report, the arrangement has become an increasingly important financial lifeline for Tehran, one that sources say has also been used to obtain military supplies and equipment. The system is essentially a sophisticated form of barter trade. Iran sells oil to China, but instead of the proceeds being wired back to the regime through banks that are vulnerable to US sanctions, the money stays inside China. Iran receives credits against those oil sales and can then use those credits to pay Chinese companies for goods and services.

Reuters says somewhere between $2 and $2.5 billion flowed through one part of this system over the past year alone. Iran has reportedly used those funds to acquire medicine, vehicles and communications equipment. Sources also told Reuters that the mechanism was used at least once in connection with contracts for millions of dollars worth of air defense equipment, although Reuters could not independently verify those transactions.

At the center of the arrangement is a mysterious China-based entity known as Chuxin. According to sources familiar with intelligence collected on the operation, a buyer acting for the Chinese state-owned oil trader Zhuai Zhenrong deposited hundreds of millions of dollars a month with Chuxin to cover purchases of Iranian crude. From there, the money could be directed toward Chinese companies working on projects inside Iran or placed into a special purpose vehicle that Iranian importers could draw from to buy Chinese goods. And here's one of the more interesting details. Reuters searched Chinese corporate records and couldn't find any financial institution called Chuxin. One source suggested that it may effectively exist only on a spreadsheet. Chinese manufacturers receiving payment through the system may not necessarily be dealing with Iran directly, and Reuters found no indication that those companies themselves were violating sanctions. Instead, the oil sales and the eventual purchase of Chinese goods are separated by multiple entities and accounts, making the underlying transactions much harder to follow. Most of the money reportedly goes toward infrastructure. Sources say roughly 70% of the Iranian oil proceeds handled through Chuxin have been allocated to projects inside Iran. The rest can be placed into that special purpose vehicle that's used to finance imports. The arrangement also gives Beijing something that it wants, discounted oil. China was already buying more than 80% of Iran's shipped crude oil last year, averaging roughly 1.4 million barrels per day. Decades of sanctions have left Tehran with relatively few customers willing to take that oil, which has made China obviously enormously important to the Iranian economy.

In this case, Beijing gets access to discounted Iranian crude, while attempting to keep its largest banks and internationally exposed companies away from the transactions that could trigger severe US penalties. Andrea Caselli, a researcher who studies Chinese relationships in the Middle East, told Reuters that Beijing wants to demonstrate that Washington can't dictate all of its trade through the threat of secondary sanctions. But China also has no interest in seeing its major financial institutions cut off from the global financial system. So Beijing basically gets what they want, which is plausible deniability through this barter trade system. That helps explain why a system like this would be attractive to both governments, of course. Iran gets to extract value from sanctioned oil, China gets cheap crude, and the financial architecture makes it considerably more difficult for Washington to identify a major Chinese bank simply processing payments directly for Tehran.

The mechanism reportedly dates back to at least 2021, when it was initially used to help Iran purchase medicine and COVID vaccines. Sources say its importance has increased as Washington tightened economic pressure. But the war may have exposed a weakness in the entire system. Reuters says it could not determine how badly the current US naval blockade has disrupted this arrangement. What we do know is that no Iranian crude shipments have successfully crossed the Strait of Hormuz on its way to China. Since the blockade was reinstated on July 14th. And that creates, of course, a different problem for Tehran. For years, the challenge was figuring out how to sell oil without having the payments frozen, seized or blocked by the international financial system. Iran and China appear to have developed an elaborate answer to that problem. But none of those financial workarounds matter very much if the oil can't reach the buyer. Chinese refiners are already searching elsewhere for supplies, snapping up crude from West Africa, Canada and South America, as Iranian and Russian barrels become harder to obtain.