The WSJ details how Iran transacted with China using China’s financial architecture, which relies on several mechanisms: Chuxin, special-purpose vehicles, mBridge, and CIPS.
Chuxin is an entity in which yuan payments from Chinese buyers (of Iranian oil) are parked rather than sent directly to Iran. The money is then passed to Chinese contractors working on Iranian infrastructure projects like airports and refineries.
Special-purpose vehicles shuffle yuan to Chinese exporters, who ship car parts and other goods back to Iran in exchange for the oil.
mBridge is a platform launched by China, the UAE, Thailand, and Hong Kong that lets central banks settle payments directly using blockchain, with no U.S. bank touching the transaction. All of this runs on CIPS, China’s alternative to the SWIFT messaging network, which the U.S. can’t easily monitor.
The same yuan playbook, applied to Russia
The WSJ also reports that a similar pattern has played out with Russia since its war in Ukraine began in February 2022. After the U.S. tightened sanctions, more Russian oil exports and other trade with China were settled in yuan.
Today, Russian officials say more than 90% of trade between Russia and China is settled in yuan and Russian rubles. For comparison, the yuan was used in just 2% of Russian trade in February 2022.
