China is buying crude oil from Iran using its currency the yuan, an Iranian diplomat has said, according to BBC News.

Oil transactions are usually settled in dollars but U.S. sanctions make it difficult for Iran to accept payments in the U.S. currency. Iran is using the revenue to buy goods and services from China, Mohammed Reza Fayyad, Iran's ambassador to the United Arab Emirates, confirmed.

The Iranian ambassador's comments, reported by the Reuters news agency, confirmed a report in the Financial Times that claimed that Unipec - a subsidiary of the Chinese state-owned oil firm Sinopec - was buying the oil through a trading unit called Zhuhai Zhenrong.

Meanwhile, China has been trying to promote usage of yuan as an international currency as a rival to the dollar, including the establishment of a new offshore trading centre in London alongside the existing centre in Hong Kong.

The U.S. plans to implement a round of sanctions, starting on 28 June, against banks based in countries that do not cut their oil imports from Iran.

The U.S. and its western partners suspect Iran of using its nuclear programme to develop the capacity to make atomic weapons. Tehran says the programme is solely for civilian purposes.

The U.S. has already said it will not apply sanctions to banks in Japan and 10 EU countries, after they all agreed to cut their imports from Iran.

China, India and South Korea, now find themselves at the centre of current U.S. lobbying efforts.

China has already cut its imports from Iran by half in the first three months of this year, although this was mainly in order to negotiate better trading terms with Tehran. It is unclear whether the cuts will be continued into the rest of the year.

China is highly dependent on crude oil imports, and petrol prices in China have been rising sharply this year.