London (Special to Informed Comment; Feature) – Since returning to office in January, US President Donald Trump has reinstated the maximum pressure campaign of his first administration on Iran. Trump wants to push Iran into ending its nuclear programme, and the White House has tried to severely curtail Iran’s oil exports as way of putting economic pressure on Tehran. China is a major buyer of Iranian oil, along with oil from other states Western countries have sanctioned, like Venezuela and Russia. Chinese refineries have saved billions of dollars for years buying from these sources at a discount, and these sales have historically provided Iran with an economic lifeline that Trump is seeking to cut.
At the same time, Trump has both sought talks with China over the two countries’ long-running trade war — which he initiated in 2018 during his first term — and imposed fresh tariffs on Beijing. China’s increasing embrace of Iran is emerging as another source of friction in the US-Sino relationship and is likely to spark more US trade restrictions on Chinese entities.
China’s Ties to Iran
China is Iran’s largest training partner, though the importance of this fact should not be exaggerated, as Beijing has strong economic relations with multiple Middle Eastern states, including Iranian rivals like Saudi Arabia.
Moreover, tough Western sanctions leave Iran with few other options for major economies with whom to trade. China has made some overt diplomatic moves to signal support for Iran in its confrontation with the US, however. Earlier in March it held trilateral talks with Russia and Iran on the latter’s nuclear programme, in which the three countries called for the end of “unilateral” sanctions on Iran. Russia and China also supported Iran’s right to develop a peaceful nuclear energy programme, which Tehran has insisted is all it plans to use its nuclear development for. Also in March, the trio held annual naval drills near the Iranian port of Chabahar, highlighting their joint military ties.
“Iran Dark Tanker,” Digital, Dream / Illustrator 3.0.
US pressure on Iran Grows
Iran’s geopolitical position in the Middle East has weakened in recent years, as the capabilities of militias like Hezbollah that Teheran had support have been degraded by Israeli attacks in Lebanon, Gaza, Yemen and Syria. Iran also lost a key ally when rebels overthrew the Syrian regime of Bashir al-Assad in December. As president, Trump has backed Israel’s offensive in Gaza against Palestinian militant group Hamas, with his press secretary saying the president “fully supports” the Israel Defence Force’s resumption of attacks there.
The US president has also ordered air strikes on the Houthi rebel movement in Yemen and declared Iran must stop funding the group. Trump sees these attacks as another way to weaken Iran and pressure it on the nuclear question. By weakening Iran militarily, the White House also believes it is degrading Iran’s ability to respond in the event negotiations end and the US launches airstrikes against Iran’s nuclear programme and military infrastructure.
The US Sanctions Chinese Entities
Ongoing Chinese financial ties to and symbolic diplomatic support for Tehran has therefore irritated the US administration, as it works to isolate Iran during a period of Iranian vulnerability. Ties between the US and China have also frayed badly in the current period, while pressuring Beijing is a rare area of bipartisan agreement in Washington between Republicans and Democrats. In March, the Trump administration moved to sanction two Chinese entities and a various of oil tankers it alleges are involved in Iranian oil sales to Beijing, knowing this would be politically popular.
These include an oil terminal in China for buying and storing Iranian oil, and a so-called “teapot” refinery there, a smaller independent refinery often set up in China by entrepreneurs there to circumvent Western oil sanctions that larger state-owned refineries don’t wish to breach. The US also sanctioned 19 entities and vessels it alleged where involved in transporting Iranian oil. “Teapot refinery purchases of Iranian oil provide the primary economic lifeline for the Iranian regime, the world’s leading state sponsor of terror,” said Secretary of the Treasury Scott Bessent. “The United States is committed to cutting off the revenue streams that enable Tehran’s continued financing of terrorism and development of its nuclear program”.
The sanctions angered officials in Beijing, which responded as it has in similar circumstances to US trade restrictions, that China would defend the lawful rights and interests of its companies from US restrictions. On March 21, a Chinese foreign ministry spokesperson said: “It is China’s consistent position to oppose the US abuse of illicit unilateral sanctions and long-arm jurisdiction. The US needs to stop disrupting the normal business cooperation between China and Iran.”
China-Iran Trade Will Continue
Chinese oil executives say they expect the US to impose more sanctions on Chinese businesses involved in buying oil from Iran. The recent US moves will increase costs on shipments and likely slow the trade as the businesses involved adjust their practices in response. However, after a fall in January, China’s Iranian oil imports rose to over 1.4 million barrels per day to just under a million the previous month per analytics firm Kpler in March. China’s government and companies do not share the US government’s antipathy towards Iran, and Chinese organizations have plenty of experience at evading US restrictions in other fields, like semiconductor imports into China.
As relations between the US and China worsen due to their growing competition over global economic and technological leadership, China is unlikely to crack down on entities there engaged in oil trading with Tehran. Beijing also tolerates its nationals’ involvement in allegedly supplying arms and dual use technology to direct US enemies like Iran’s Islamic Revolutionary Guard Corps. Meanwhile, Chinese President Xi has met with Iranian leaders and signed economic cooperation agreements with them in October and December. Further US economic pressures on both are likely to drive the two sides closer together rather than further apart. Though China would not risk war with the US over Iran, Beijing will continue to take advantage of the discounts US pressure on the Tehran’s oil industry can provide its struggling economy.
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