China and Iran discuss barter system to offset oil debt

China and Iran are negotiating a barter system to trade Iran’s oil for Chinese goods and services, thanks to US sanctions that have made Chinese payment in US dollar-denominated transactions impossible, the Financial Times reported. China could owe Iran about US$30 billion in unpaid bills for oil accumulated over the past two years, according to insiders. China and India together account for about a third of Iran’s oil exports, while Chinese demand has risen 49% this year. While Iran has threatened to cut exports to India, which has been unable to transfer the US$5 billion it owes the country, China’s bilateral trade with Iran is significant enough that a barter system might feasibly be able to “offset” the trade deficit.