China and Russia Sustain Iran Through Oil, Intelligence and Dual-Use Networks During U.S. War

Highlights

• Russia supplied Iran with U.S. warship locations and upgraded Shahed drones, while China absorbed roughly 90% of Iran's oil exports through shadow fleets and front companies.
• OFAC sanctioned Hengli Petrochemical's Dalian refinery for purchasing billions in Iranian petroleum, and VTB Bank for helping Iran evade sanctions via correspondent banking.
• U.S. officials linked Chinese-sourced satellite imagery to an Iranian strike that killed three American troops at Muwaffaq Salti Air Base in Jordan.
• China controls 71% of mined rare earths, 87% of processing, and 99% of primary gallium output—creating a second chokepoint behind the kinetic conflict over missiles and drones.
• Prolonged conflict raises the strategic value of non-China rare-earth magnets, tungsten, gallium, and processing capacity, as sanctions alone cannot rebuild U.S. arsenal replenishment capacity.

China and Russia have not openly entered Iran’s war with the United States as co-belligerents. But mounting evidence points to something more consequential than diplomatic sympathy: a network of intelligence, technology, weapons procurement, finance, and oil trade that helps Tehran sustain the fight. Russia is tied most directly to battlefield support. U.S. officials told The Washington Post that Moscow supplied Iran with locations of U.S. warships and aircraft. U.S. and European officials later told AP that Russia was sending upgraded Shahed-derived drones back to Iran. China’s role is broader—and potentially more important. Treasury says China buys approximately 90% of Iran’s oil exports, while Chinese and Hong Kong entities have been sanctioned for facilitating Iranian weapons procurement. U.S. officials also linked satellite imagery obtained from Chinese entities to an Iranian strike that killed three American troops in Jordan. Washington has not publicly established that Beijing directed that imagery transfer.

REEx Insight: Tehran’s Lifeline Is a Network, Not an Alliance

REEx sees an asymmetric division of labor: Russia can sharpen Iran’s battlefield capabilities; China sustains much of the economic and commercial ecosystem behind them. Neither requires Chinese troops, Russian pilots, or an acknowledged government order. That distinction matters. Treasury describes Iranian oil moving through shadow fleets, front companies, and deceptive shipping practices. In April, OFAC sanctioned Hengli Petrochemical’s Dalian refinery, saying it had purchased billions of dollars of Iranian petroleum.

The military side is becoming harder to dismiss. In March, satellite imagery and vessel tracking showed sanctioned Iranian ships departing a Chinese chemical port carrying unidentified cargo. Experts told The Washington Post the port handles sodium perchlorate, a precursor for solid rocket propellant. The cargo itself was not independently confirmed as that chemical.

More directly, The Wall Street Journal reported that U.S. officials connected Chinese-sourced high-resolution satellite imagery to Iran’s July 17 strike on Muwaffaq Salti Air Base in Jordan, which killed three U.S. troops. The Chinese suppliers were not publicly identified, and Washington did not accuse the Chinese government of ordering the assistance. Beijing rejected the allegation.

Reuters separately reported a $60–70 million agreement for Iran to acquire 300–400 Chinese-made QW-12 and FN-16 shoulder-fired air-defense systems. The reported deal is significant—but should remain categorized as reported, not confirmed delivery. China called the report groundless.

Russia’s footprint is less commercially diffuse but more directly military. Three U.S. officials told The Washington Post that Moscow had supplied Tehran targeting information on American military assets after the war began. The Kremlin declined to comment. AP subsequently reported, citing U.S. and European officials, that upgraded Russian versions of Iran’s own Shahed drones were being transferred back to Iran; Moscow denied the allegation.

The financial architecture is also widening. On September 14, Treasury sanctioned Russia’s VTB Bank, saying it had helped Iran evade sanctions by establishing correspondent relationships with sanctioned Iranian banks. Three days later, China and Russia vetoed a U.N. resolution that would have continued expert monitoring of reimposed Iran sanctions.

The Chokepoint Behind the Chokepoint

For critical-minerals investors, Iran exposes another layer of vulnerability. USGS estimates China accounted in 2024 for 71% of mined rare earths, 87% of rare-earth processing, 82% of mined tungsten, and 99% of primary gallium production. DoD says NdFeB rare-earth magnets are used in missiles, submarines, major aircraft, and unpiloted vehicles.

That means Washington is confronting two interconnected chokepoints: the kinetic contest over missiles, drones, and interceptors, and the industrial contest over the materials required to replace them. There is no public evidence that Beijing has restricted critical minerals specifically to assist Iran. But China’s existing leverage is real: rare earths are already an issue surrounding this week’s Trump-Xi summit. That makes Iran another example of a recurring REEx theme: physical and economic chokepoints are converging into one strategic system.

The investment implication is straightforward. Prolonged conflict increases the strategic value of non-China rare-earth magnets, tungsten, gallium, processing capacity, inventories, and binding offtake agreements.

Sanctions can constrict Iran’s networks. They cannot substitute for an industrial base capable of replenishing American arsenals.

Sources & Citations

1. The Wall Street Journal — reporting on Chinese assistance to Iran and the Trump-Xi summit context. WSJ: China-Iran Aid and Xi-Trump Summit (opens in a new tab)
2. The Wall Street Journal — “U.S. Links Chinese Satellite Imagery to Iranian Strike That Killed Three Troops.” WSJ investigation (opens in a new tab)
3. U.S. Department of the Treasury — Treasury documentation stating China purchases roughly 90% of Iran's exported oil and describing the shadow-fleet and intermediary networks supporting that trade. U.S. Treasury Iran oil sanctions release (opens in a new tab)
4. U.S. Department of the Treasury — sanctions against Hengli Petrochemical's Dalian refinery over purchases of Iranian petroleum. Treasury: Hengli Petrochemical sanctions (opens in a new tab)
5. The Washington Post — investigation of sanctioned Iranian vessels departing a Chinese chemical port associated with materials relevant to missile-propellant production. Washington Post investigation (opens in a new tab)
6. The Washington Post — U.S. officials' account that Russia supplied Iran with targeting information concerning U.S. ships and aircraft during the conflict. Washington Post: Russia-Iran targeting intelligence (opens in a new tab)
7. Reuters — reporting on Iran's proposed acquisition of 300–400 Chinese-made QW-12 and FN-16 MANPADS in a reported $60–70 million transaction; includes China's denial. Reuters: Iran and Chinese MANPADS (opens in a new tab)
8. U.S. Department of the Treasury / OFAC — sanctions involving Russia's VTB Bank and Iran-related sanctions-evasion and banking relationships. Treasury sanctions release (opens in a new tab)
9. U.S. Geological Survey — data on China's position across rare-earth mining and processing, tungsten, gallium, and other strategically important mineral supply chains. USGS: China's role in critical-mineral supply chains (opens in a new tab)
10. Reuters — analysis of China's rare-earth leverage immediately ahead of the September Trump-Xi summit. Reuters: Rare earths and the Trump-Xi summ (opens in a new tab)