Iran is reportedly negotiating a landmark oil-for-arms deal with Chinese companies, seeking to replenish its depleted military arsenal following a devastating conflict with Israel and the reimposition of international sanctions. Sources close to the matter indicate that the Islamic Revolutionary Guard Corps (IRGC) and Iran's Armed Forces General Staff are utilizing commercial ties in China to acquire strategic weapons systems, including missiles, drones, and air defense equipment, in exchange for unpaid oil shipments.
According to an exclusive report by Iran International, the IRGC's primary Chinese partner in these negotiations is Haokun Energy Group, a Beijing-based firm operated by former Chinese military officials. Haokun allegedly owes Iran nearly $1 billion for oil transactions conducted over several years with IRGC-linked entities. A high-ranking IRGC delegation visited China in September to discuss settling this debt through direct weapons transfers, the source told Iran International.
While official Iranian reports did not mention the IRGC visit, President Masoud Pezeshkian led a separate government delegation to China around the same time, announcing "good agreements" with Chinese officials. One such agreement, the source confirmed, involved Haokun transferring military equipment to Iran as partial repayment for its oil debt.
If finalized, this would mark the first publicly reported instance of China supplying weapons to Iran in exchange for oil, potentially violating newly reinstated UN sanctions. These sanctions, triggered by European powers concerned about Iran's nuclear ambitions, prohibit the import and export of military equipment to and from Iran, including missile systems and related technologies.
Iran's urgency in securing new defense systems stems from the extensive damage its military infrastructure suffered during a 12-day war with Israel in June. Military assessments indicate the loss of over 70 key air defense systems and radar units, severely compromising Iran's operational capabilities.
In addition to the IRGC's dealings with Haokun, Majid Azami, CEO of Sepehr Energy—a company affiliated with the Armed Forces General Staff—has reportedly engaged in parallel negotiations with a Hong Kong-based energy firm to procure advanced air defense systems. Azami was sanctioned by the U.S. Treasury in 2023 for facilitating international oil sales on behalf of Iran's military.
China has so far opposed the reactivation of the UN's snapback sanctions mechanism and has not signaled any intention to comply. A recent Wall Street Journal investigation revealed that Beijing is funneling billions to Iran through a covert payment system that swaps oil for infrastructure projects, enabling Tehran to receive up to $8.4 billion last year despite sanctions.
Iran's military control over its oil exports has grown significantly, with the IRGC reportedly managing nearly half of all shipments to China via a shadow fleet and front companies. In December 2024 alone, Sepehr Energy exported almost 2 million barrels of oil, valued at over $100 million, to China.
While Haokun has previously attempted to settle its debts through infrastructure contracts and aircraft transfers, the current negotiations signal a shift toward direct military cooperation. If successful, the deal could reshape regional dynamics and further strain Iran's relations with Western powers.
Haokun Energy has not responded to requests for comment.
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