China’s support for Iran shows its limits as US ramps up pressure on Tehran

China's relationship with Iran, while significant, is characterized by a profound asymmetry and Beijing's cautious approach to avoid direct confrontation with the United States. Despite being Iran's top trade partner and absorbing up to 90 percent of its oil exports since the US-Israel war began in late February, Iranian crude constitutes only about 2 percent of China's total energy needs. This disparity underscores China's ability to provide an economic lifeline without becoming overly reliant on Tehran, thereby maintaining flexibility in its foreign policy.

Operation Economic Outcast

The Trump administration's intensified sanctions campaign, dubbed "Operation Economic Outcast," aims to further isolate Iran economically. While Washington has targeted independent "teapot" refiners and some China- and Hong Kong-based firms involved in Iranian oil trade, it has largely refrained from sanctioning major Chinese state-owned banks. This strategic restraint is likely influenced by the desire to de-escalate trade tensions with Beijing ahead of a scheduled summit between President Xi Jinping and President Trump. Analysts are skeptical that the US will risk provoking China's full ire by targeting its major financial institutions, suggesting a calculated approach to pressure Iran without completely alienating a key global economic player.

However, the threat of secondary sanctions remains a potent deterrent for major Chinese entities. State-owned refiners like Sinopec and PetroChina have already shunned Iranian oil for years, demonstrating a clear consciousness of sanctions exposure. This cautious behavior highlights the practical limits of China's willingness to defy US economic policy, even when it politically opposes unilateral sanctions. The legitimate question of why third countries should adopt Washington's policies is acknowledged, but the commercial realities for Chinese firms often outweigh political solidarity, especially when access to the dollar-based global financial system is at stake.

Shanghai Cooperation Organisation

The annual gathering of the Shanghai Cooperation Organisation (SCO) this week in Bishkek, Kyrgyzstan, provided a platform for China to project its influence among non-Western leaders, including Iranian President Masoud Pezeshkian. While Iranian state media reported a brief meeting between Pezeshkian and Chinese President Xi Jinping, Chinese outlets notably omitted any mention of the encounter. This discrepancy underscores the symbolic nature of some of China's engagements with Iran, where public rhetoric of partnership often diverges from the practical realities of diplomatic prioritization.

Xi's immediate follow-up visit to Egypt, his first in a decade, further illustrated China's broader strategic focus on the Middle East. During this visit, Xi called on regional countries to oppose "external interference" and reiterated calls for a diplomatic resolution to the Iran war. This positioning allows China to advocate for de-escalation and stability in the region, aligning with its global interests, without committing to a direct confrontation with the US on Iran's behalf. The SCO, while seen as a counterbalance to US hegemony, serves more as a forum for multilateral cooperation than a bloc for aggressive defiance of US policy regarding specific nations like Iran.

Ali Fekri

The gap between China's rhetorical support and actual economic commitment to Iran is starkly illustrated by the comments of Iran's then-deputy economy minister, Ali Fekri. In 2023, Fekri expressed dissatisfaction with China's investment levels since the 2021 "comprehensive strategic partnership agreement," which had pledged up to $400 billion over 25 years. He noted that only about $185 million had materialized, a fraction of the promised sum. This highlights the significant hurdles faced by Chinese firms in Iran, including navigating US sanctions and the opaque Iranian bureaucracy.

Experts like Leonardo Bruni of the ChinaMed Project emphasize that Chinese companies have little incentive to jeopardize their ties with the international financial system for expanded business in Iran. The ease and profitability of trading and investing elsewhere make Iran a less attractive destination, despite the strategic partnership agreement. This commercial calculus, combined with Iran's own domestic infrastructure challenges, explains the substantial shortfall in Chinese investment. Ultimately, while China offers political opposition to US sanctions, its economic engagement with Iran is dictated by pragmatic considerations and a reluctance to incur significant financial or diplomatic costs.