WASHINGTON—There is a lot of attention right now on how Iran is managing access to the Strait of Hormuz—operating a kind of “toll booth” in which it clamps down on commercial flows through the vital waterway while reportedly allowing some vessels to transit for as much as $2 million per voyage or according to particular political and financial conditions.
But an important question has received far less attention: How are Iran and oil purchasers settling their payments under current conditions? What follows is an effort to answer that question, drawing on new GeoEconomics Center research, to shed light on the policy levers Tehran is pulling and the economic-statecraft and technological tools it is employing—as well as the implications for sanctions enforcement.
How Iran settles cross-border payments today
Iran’s cross‑border payments system reflects years of sanctions‑driven adaptation. In 2012, sanctioned Iranian banks were disconnected from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, which serves as the core infrastructure for global financial messaging. While this did not make all transactions with Iran impossible, it made standard cross-border settlement much more difficult by cutting off access to the main channel for bank-to-bank communication.
In January 2016, following verification steps under the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, many Iranian banks were reconnected to SWIFT and some financial sanctions were lifted. But after the United States withdrew from the JCPOA in 2018 and reimposed secondary sanctions, access to formal financial channels narrowed again. This repeated cycle of reintegration and new restrictions made it clear to Tehran that formal dollar-clearing or euro-denominated trade finance was unreliable.
In response, Iran has shifted its cross‑border payments system to a set of overlapping workarounds. Some transactions still move through formal banking channels in jurisdictions willing to absorb sanctions risk. Others are routed through intermediaries that can hold funds, net obligations, or obscure beneficial ownership. Complementing these efforts are state-led initiatives such as the Shetab system. While primarily focused on domestic payments, Iran recently expanded Shetab for cross-border use through a strategic integration with Russia’s Mir payment system. This link connects the national payment switches of both countries, allowing their respective bank cards to be “read” and processed by the other’s banking hardware. There also are several informal networks that settle transactions entirely outside of the banking system. For example, the US Treasury’s Financial Crimes Enforcement Network has described Iranian “shadow banking” networks that rely on Iran‑based exchange houses and foreign front companies—particularly in the United Arab Emirates (UAE), Hong Kong, and Singapore—to move billions of dollars tied to oil exports and other activities.
At the base of this structure is hawala, a long-standing, trust-based system that enables value transfer without formal cross-border movement of funds. These networks are anchored in regional hubs such as Dubai, where a large number of Iranian-linked firms operate and provide counterparties for informal settlement. On top of this, Iran uses state-linked intermediaries, including front companies and trading entities, to facilitate transactions tied to oil exports. More recently, Iran also has relied on cryptocurrency to facilitate transactions that can bypass traditional banking rails. For example, the blockchain analysis firm Chainalysis estimated that Iran‑linked crypto activity reached $7.8 billion on‑chain in 2025, with stablecoins increasingly used for settlement and a growing share tied to sanctioned entities. US enforcement actions have increasingly targeted these channels, including sanctions on exchanges and wallet clusters associated with Iranian activity.
For Tehran, formal, semi‑formal, and informal channels operate in parallel, with transactions routed through different layers depending on risk tolerance, counterparties, and the constraints in place at any given time.
How China’s yuan fits in
China is now Iran’s main oil customer, buying over 80 percent of its seaborne exports. In this partnership, Iran trades discounted oil for Chinese investment and goods, with payments increasingly handled in yuan instead of dollars to reduce exposure to US oversight while also advancing the internationalization of China’s renminbi (RMB). Chinese refiners often buy Iranian oil through intermediaries and non‑dollar banks. The money stays in controlled accounts and is mainly used to pay Chinese contractors or cover imports rather than flowing directly into Iran’s banking system.
China’s Cross-Border Interbank Payment System (CIPS), a clearing and settlement network launched by the People’s Bank of China (PBOC) in 2015 to process cross-border renminbi transactions, could be a potential channel for these yuan-denominated purchases of Iranian oil.
GeoEconomics Center analysis of CIPS data shows in the chart below that monthly averages for daily transaction volume remained within a $85–105 billion (600–750 billion yuan) range over the past year. In mid-to-late March, however, daily observations rose to over $130 billion (around 940 billion yuan). The increase in volume is notable in the context of the ongoing Iran war, which began on February 28, but it does not by itself show that Iranian oil payments are moving through CIPS. CIPS handles tens of thousands of transactions a day that reflect a wide range of uses, so the data are best read as a sign of broader growth in renminbi settlement capacity, not as direct proof of Iran-linked flows. Beijing also has widened the mandate of CIPS so it can handle some non‑renminbi currencies and provide broader cross‑border services, making it more flexible as a backbone for regional payments.
The UAE could be emerging as an increasingly important player in this network. First Abu Dhabi Bank joined CIPS as a direct participant in mid‑2025 and was later named an official renminbi clearing bank. Iran has incentives to use RMB in its energy trade with China, while the UAE has long functioned as a hub for Iran’s trade and commercial finance. Given China’s role as the primary destination for Iran’s shipped oil, a Gulf‑based RMB clearing hub could reduce friction in RMB‑denominated trade flows linked to China and support greater regional RMB liquidity. But there is little visibility into how these channels are being used during the current conflict or what is driving the recent uptick in CIPS activity. Any such transactions would likely occur indirectly through Chinese or third-country banks rather than through direct participation on the CIPS network, limiting visibility into how the systems are being used now.
China also could leverage Project mBridge, a cross‑border payments platform designed to enable direct settlement between central bank digital currencies (CBDCs), for purchases of Iranian oil. Originally incubated under the Bank for International Settlements (BIS) Innovation Hub, the project brings together the PBOC, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the United Arab Emirates, and the Central Bank of Saudi Arabia. The project has made more than 4,000 transactions worth $55.49 billion, with China’s digital yuan comprising 95.3 percent of the volume.
In November 2025, the UAE executed its first government payment using the wholesale digital dirham on mBridge, testing readiness for settling energy and commodity trade—sectors in which China dominates. Data on mBridge usage remains limited, as neither the PBOC nor participant banks are required to disclose those details. There is no public evidence yet of Iran-linked usage of mBridge, and Iran is not a member of the system, which remains experimental. In practice, however, the UAE’s banks, exchange houses, and free‑zone shell companies already serve as conduits for Iranian‑linked trade and finance, raising the possibility that mBridge‑linked institutions could indirectly handle Iranian‑linked transactions even if Iran itself is not a participant in the platform.
Conversations that the Atlantic Council’s GeoEconomics team recently had with policymakers in Europe indicate that Group of Seven (G7) finance officials believe participants may be leveraging mBridge during the Iran war. But the linkages and scale are impossible to know without more information. Given the project’s focus on commodity trade with Gulf countries and China, interest in its potential role in Iranian oil payments is high.
What to watch next
As developments around Iran and its oil trade continue to draw attention, policymakers should focus on several key signals.
First, will renminbi‑based payment infrastructure continue to grow? In particular, will CIPS continue to expand its network in the Middle East, where yuan‑denominated trade is easier to facilitate? Project mBridge remains opaque, with limited public data available. Still, as central banks continue to develop and test wholesale CBDCs, indicators such as new country participation in cross-border projects, energy-related pilot transactions, or spikes in activity during periods of financial or geopolitical stress could point to this technology being used more actively.
Iran, too, is advancing its “digital rial” CBDC, initially a reaction to US sanctions, which could eventually give Tehran an additional channel to steer retail and wholesale payments through digital channels. All founding BRICS countries are testing wholesale CBDCs and continue to push for a more multipolar global currency system. Much of this effort focuses on building domestic digital payment networks while piloting cross‑border applications that enable trade settlement in local currencies. Watch for any signals emerging from the next BRICS summit, planned for September 2026 in India, as well as broader developments in these payment systems—particularly given that India is the second‑largest buyer of Iranian oil.
It is important to note that these systems still do not challenge the dollar’s status as the reserve currency and its prevalence in international transactions. CIPS continues to have a much smaller network than the West’s financial architecture, which includes SWIFT and the Clearing House Interbank Payments System (CHIPS). However, these alternative systems do undermine a pillar of dollar dominance: the power of financial sanctions. Especially in this case, they provide Iran with channels to maintain oil revenue and trade flows despite pressure.
Iran has levers it can use to facilitate trade in yuan or other non-dollar currencies. Tehran’s payment landscape, however, remains fragmented. The yuan does not provide Iran with a way out of sanctions, but it may offer a cheaper way through them by reducing dependence on dollar-clearing channels and lowering the compliance and intermediary costs associated with sanctioned transactions.