Israel’s attack on Iran threatens to cut China off its key oil trading partners, underscoring the need to increase energy independence and disrupt Beijing’s hopes for a greater role in the region.
Over the years, China has used its relationship with Iran to expand its influence in the Middle East, then made cheap Iranian crude oil, supplying its Gulf supply more widely, and is the bedrock of the energy mix of the world’s largest oil buyers.
Chinese President Xi Jinping said this week that all political parties in the Israeli-Iran conflict should work “as soon as possible to prevent further escalation of tensions.” China said the US should not hamper “normal trade” with Iran and it is opposed to US-led sanctions.
“Of course, China is worried (with the latest attacks),” said Gedalia Afterman, a Chinese and Middle East expert at Israel’s Aba Evan Institute of Diplomacy.
“If this situation continues to escalate, we will lose a lot of it as a strategic card that China holds, both in terms of energy security and Iran.”
Since US-led sanctions over Iran’s nuclear program were stepped up in late 2018, Beijing and Tehran have strengthened relations.
Beijing has become Tehran’s most important economic lifeline, purchasing most of Iran’s oil cargo and supplying the country with electronics, vehicles, machinery and nuclear equipment.
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Last year, Iran’s oil accounted for 15% of crude oil shipped to the world’s second largest economy. Last year, China imported about 11.1 million barrels of oil a day, according to the US Energy Information Agency.
Iran’s crude Chinese purchases were bordered higher throughout 2023 and most of 2024, but began to be mitigated late last year as the threat of new US sanctions increased, according to data from Kpler and Bernstein of the Cargo Tracking Research Group.
Iran exported 2.4 million barrels of crude oil a day in September 2024, with China accounting for 1.6 million barrels. By April, Iran’s cargo had dropped to 2.1 million barrels per day, of which China had accounted for 740,000 barrels. Malaysia is also a key exporter to China as cargo shipped from Iran has been held or moved to avoid sanctions, analysts said.
Analysts at Fitch Rating this week said “even events where all Iranian exports are unlikely to be lost.”
Other, more serious energy disruptions can emerge. The war at risk of ripple over the wider regional conflict has already poses a threat from Iran that it could hinder the Strait of Hormuz.
Thousands of billions of dollars of oil and gas are shipped via waterways from nearby Gulf countries every year, including Saudi Arabia, China’s largest crude oil supplier outside of Russia.
View of a ship with a fire in a reported collision area between two oil tankers near the Hormuz Strait
China has not officially made public its strategic oil reserves. However, Mikal Meidan, head of China research at the Oxford Energy Institute, estimates that across all storage types there will be approximately 90-100 days of coverage when flowing into the country.
Beyond Saudi Arabia’s increasing dependence on oil, S&P Global Analysts say that more than 25% of China’s liquefied natural gas imports last year came from Qatar and the United Arab Emirates. China has 15 LNG supply contracts with these two Gulf countries, but importers could be forced to buy from the spot market at a higher price, S&P analysts said.
For China, the Israeli-Iran crisis war occurs amidst a structural change in the country’s energy mix. For decades, the country has been the world’s largest oil user. Under XI, China is competing to increase energy independence. This is a transition that will ultimately require a significant increase in renewable energy and electrification of the country’s transport and manufacturing bases.
The solar and wind boom has increased its share of renewable energy power plants’ capacity to 56% last year, from about a third of its 10 years ago.
According to Neil Beveridge, Bernstein’s Head of Asia-Pacific Studies, the “critical point” of the Quine Government from the crisis is to double the drive of self-sufficiency.
“If it hadn’t happened fast enough before, it would still happen even faster,” he said.
Storage Facility for Petrochemical Resources and Products in Longkou, Shandong Province, East China ©Tang Ke/Future Publishing/Getty Images
Analysts said China may benefit in the short term as Washington’s attention is focused more on the Middle East than tensions with Beijing.
However, long-term weakened Iran threatens to undermine China’s diplomatic influence in the region, potentially destroying the desire to portray itself, at least within the country, as a reliable mediator of global conflict.
In 2021, Beijing signed a 25-year cooperative program with Tehran. Iran also joined the China-led Shanghai Cooperation Agency in 2023. This is part of China’s efforts to position itself as responsible power and provide developing countries with an alternative to US-led global institutions.
In 2023, Beijing promoted its role in brokering the Saudi Alana trade and announced a 12-point peace proposal for the Russian-Ukurein War.
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Despite these moves, it appears that Beijing will likely remain on the sidelines of the Iran-Israel conflict. It highlights the limitations of the impact of China’s foreign policy, as was the case last fall in Syria’s fall.
Jin Dongyuan, director of China and Asia Security Programmes at Stockholm Institute of International Peace, said that China rhetorically supports a country that is “deemed unfairly treated or forced by the West,” but in fact, Beijing’s approach to regional conflicts is “always cautious.”
Beijing is concerned about its impact on other allies in the region, including Saudi Arabia. “We knew that the end of the Iranian system or the end of the power of Iran that we knew was not good news for China,” said Yun Sang, a Chinese foreign policy expert at Stimson Center, a US think tank. “That indirectly means that the influence of America has expanded.”
Additional Reports by Wenjie Ding in Beijing
