China buys Iranian oil... no Tehran wars

- What Tehran considers a strategic leverage card may, in Beijing’s eyes, transform it from a useful partner into an unpredictable burden.

US Treasury Secretary Scott Bessent has placed China at the center of the expanding economic campaign Washington is waging against Iran. His threat to take further action against Iranian oil shipments poses a practical test: how much economic and diplomatic risk is Beijing prepared to accept to preserve its remaining oil trade with Tehran?

China is Iran’s largest trading partner, its main oil customer, and its most important diplomatic shield in the Security Council. Beijing rejects unilateral US sanctions and insists that its trade with Tehran is legitimate. However, it has provided no security guarantees, withheld most investments linked to the 25-year Strategic Cooperation Agreement signed between the two countries, and avoided direct engagement in Iran’s conflict with the United States and Israel.

Evidence does not suggest that China has abandoned Iran; rather, it reveals the asymmetrical nature of their relationship. Beijing views Tehran as a useful strategic partner, not as an ally whose relations with Washington—or its far greater interests in the Gulf Arab states—it would jeopardize by defending.

The 25-year Comprehensive Cooperation Agreement, signed in 2021, was widely associated with potential Chinese investments worth up to $400 billion. This figure stemmed from a leaked draft and media reports, not from a binding commitment in the final agreement. Actual Chinese investments have remained below $5 billion, a figure far lower than China’s commitments in neighboring countries.

An assessment submitted to the US Congress concluded that only $185 million was registered in new Chinese projects during a specific period under review. Former President Ebrahim Raisi’s visit to Beijing in 2023 reflected Iranian concerns over the slow implementation of the agreement, while China confined itself to offering general assurances rather than announcing new major projects.

Chinese state-owned companies rely on international banking, insurance, technology, and markets. Thus, they have little incentive to risk those interests in an economy under sanctions, where payment operations, contract enforcement, and profit repatriation remain difficult. China signed the strategic document but refrained from injecting the capital that would have transformed it into an economic alliance.

Energy is the cornerstone of this relationship, but interdependence leans overwhelmingly in China’s favor. China purchased more than 80% of Iran’s oil exports in 2025, with some estimates suggesting the figure approaches 90%. Iranian shipments, averaging around 1.38 million barrels per day, accounted for approximately 12% of China’s average crude oil imports that year—a significant but replaceable share through other sources.

Large quantities of this oil were bought at discounts ranging from $8 to $10 per barrel by independent refineries (known as “teapot refineries”), not by major Chinese state-owned enterprises. These large companies have limited their direct dealings with Iranian crude to avoid the risks of US sanctions.

Accordingly, Iran relies on China to market the bulk of its oil exports, whereas Beijing, by contrast, can source crude from Russia, Saudi Arabia, Iraq, the United Arab Emirates, Australia, Brazil, and other producing nations. Consequently, Tehran lacks an easy alternative to its Chinese customers, while Beijing has the capacity to reduce Iranian supplies or replace them with other sources.

At the outset of the war on February 28 last year, China held strategic and commercial crude stockpiles estimated at between 1.3 and 1.5 billion barrels, sufficient to cover average imports for more than 100 days. It drew down approximately 500,000 barrels per day from its reserves in May and around 940,000 barrels in June. However, in July, lower refinery throughput rates enabled it to resume building inventories at an estimated rate of 210,000 barrels per day.

Beijing’s primary response was not to deplete its reserves, but rather to cut purchases, reduce refining operations, and restrict fuel exports. Consequently, the average arrival of seaborne crude shipments fell from about 11.5 million barrels per day before the war to roughly 7.1 million barrels in August. This demonstrated Beijing’s ability to temporarily withdraw from the market rather than pay any price imposed by supply disruptions.

China’s interests in the Middle East extend far beyond Tehran; Beijing maintains broad relations with Saudi Arabia, the UAE, Iraq, Oman, Qatar, and Egypt. These ties encompass investments in ports, industrial zones, telecommunications, energy, and transport infrastructure.

Iran is merely one component of this regional portfolio, not the central axis around which it revolves.

The Strait of Hormuz highlights the divergence between Iranian and Chinese priorities. Tehran views its ability to restrict navigation as leverage against the United States and its allies, whereas Beijing sees this waterway as a vital commercial artery. Any disruption to navigation drives up oil and liquefied natural gas prices, increases shipping and insurance costs, and threatens Beijing’s relationships across the region.

Iranian pressure regarding the Strait of Hormuz could also produce an outcome contrary to China’s interests: a larger and more permanent US naval presence near the region’s energy routes. As a result, Beijing has favored mediation and covert pressure over open confrontation or military involvement. What Tehran considers a strategic leverage card may, in Beijing’s eyes, transform Iran from a useful partner into an unpredictable burden.

China has condemned secondary US sanctions and pledged to protect its legitimate interests. Although Tehran sometimes interprets this language as a commitment to Iran, the core issue concerns China itself; Beijing is defending its asserted right to trade without US interference, not committing to sustain every Iranian transaction regardless of the cost.

This distinction explains why independent refiners and opaque trade networks continue to purchase Iranian oil at discounted prices, while major Chinese banks and state-owned enterprises have distanced themselves from such deals. This was also evident when, according to reports, Iranian crude loading rates fell from approximately 2 million barrels per day in March to between 220,000 and 255,000 barrels in August; China protested US pressure but did not militarily challenge the embargo or seek to restore oil flows.

Washington also has reasons to avoid imposing comprehensive sanctions on major Chinese institutions. The volume of trade between the United States and China far exceeds Beijing’s trade with Tehran, and broad measures could disrupt markets and provoke retaliatory responses. Consequently, Beijing may permit limited Iranian oil purchases through companies capable of absorbing the risks, while simultaneously shielding its key banks and corporations.

China has not betrayed Iran, because it never promised to defend it; their relationship is governed by interests and mutual benefit. Beijing buys Iranian oil when the discount justifies the risk, and Tehran receives diplomatic support when it serves Beijing’s vision of a multipolar world order. However, China’s economic ties with the Arab Gulf states are broader, its relationship with Washington more significant and influential, and its willingness to assume risks on Iran’s behalf remains limited.

China remains Iran’s most important economic partner, but importance does not imply equivalence, and strategic cooperation does not entail mutual defense...