China has long been a rare partner to Iran, with the economic heft to blunt the United States’ efforts to strangle the Iranian economy. Yet even as China opposes US President Donald Trump’s latest pressure campaign, few observers expect it to go much further than the modest economic links it has thus far forged with Iran to shield it. While China opposes the Trump administration’s military attacks and sanctions against Iran, Beijing’s relationship with Tehran is just one consideration in a foreign policy that seeks to balance relations with numerous countries, including the US and the Gulf states, limiting its appetite to prop up the Iranian leadership at any cost, analysts say.
China and Iran share substantial trade links, particularly in energy, and a mutual suspicion of US dominance, but their relationship is heavily lopsided, with Tehran depending on Beijing far more than vice versa. That asymmetry in ties was on full display this week at the annual gathering of the Shanghai Cooperation Organisation, a 10-member bloc widely seen as a counterbalance to US hegemony, where Chinese President Xi Jinping joined more than a dozen non-Western leaders, including Iranian President Masoud Pezeshkian. While Iranian state media reported that Pezeshkian held a “brief meeting” with Xi on the sidelines of the summit in Bishkek, Kyrgyzstan, Chinese outlets made no mention of the encounter.
Xi immediately followed his attendance at the summit with his first visit to Egypt in a decade on Tuesday, using the visit to call on countries in the Middle East to oppose “external interference” and reiterate his calls for a diplomatic resolution to the Iran war. As Iran’s top trade partner, China has taken up to 90 percent of Iranian oil exports since the US and Israel launched their war in late February. Iranian crude, however, accounts for only about 2 percent of China’s overall energy mix.
While China’s oil purchases have been an economic lifeline for Tehran, Chinese importers have not been immune to fears of exposure to US sanctions. China’s major state-owned refiners such as Sinopec and PetroChina have shunned Iranian oil for years, leaving the trade to independent “teapot” refiners with minimal links to the dollar-based global financial system. Though the Trump administration has imposed sanctions on these “teapot” refiners and a limited number of China- and Hong Kong-based firms and individuals, it has yet to target major Chinese banks accused of facilitating Iranian oil purchases.
The Trump administration has hinted at targeting China’s financial system as part of its ramped-up sanctions campaign, dubbed “Operation Economic Outcast”, though analysts are sceptical that Washington will risk provoking Beijing’s ire as the sides seek to lower the temperature in their trade war before a scheduled summit between Xi and Trump on September 24. But past behaviour also shows that major Chinese banks and state-owned companies are highly conscious of sanctions exposure.” Even as Beijing and Tehran have forged closer ties, their relations have for years been marked by a substantial gap between rhetoric and reality. While China pledged to invest up to $400bn in Iran over 25 years as part of a “comprehensive strategic partnership agreement” signed in 2021, few projects have materialised amid what analysts say is Chinese firms’ reluctance to navigate sanctions and the opaque Iranian bureaucracy.
In 2023, Iran’s then deputy economy minister, Ali Fekri, complained that he was “not satisfied” with China’s level of investment since the agreement, saying it had only amounted to about $185m. Iran’s own domestic physical and bank infrastructure is also an obstacle.” Meanwhile, the most tangible measure of China’s economic support, purchases of Iranian oil, has been dwindling amid the US blockade of Iranian ports. Iranian crude exports via the Strait of Hormuz, mostly bound for China, fell from an estimated 1.85 million barrels per day (bpd) in March-April to just 240,000bpd in August, according to data from ship-tracking platform Kpler, though millions more barrels shipped before the blockade are still at sea.
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