View / China’s Iran calculus extends beyond Hormuz

A key part of the agenda during US President Donald Trump’s visit to China is the status of the Strait of Hormuz, whose virtual closure has already removed around 1 billion barrels of Middle Eastern oil from global markets. For China, however, the strategic calculation may be very different to that of the US.

Beijing appears to be willing to be patient, allowing Washington to become mired in a costly and open-ended confrontation with Iran. What initially looked like a decisive campaign by the US and Israel has evolved into a stagnant and prolonged conflict, with the threat of further escalation hanging over the region. Despite the sometimes belligerent rhetoric, it is increasingly clear that Trump wants to see an exit, which has proven far more complicated than the brief excursion in Venezuela earlier this year.

China holds some economic and political leverage over Iran. But while official statements from Beijing continue to stress the need for a rapid diplomatic solution, in practice China has given Tehran arguably its biggest strategic advantage: More time to entangle the US in a drawn-out conflict. Perhaps anticipating Beijing’s position, Trump told reporters on Tuesday that he does not need China’s assistance. “I don’t think we need any help with Iran,” he said, adding that the US would win the war “one way or the other.”

Beijing is vulnerable to a prolonged conflict, with roughly 40% of the oil it needs previously flowing through Hormuz. But China has spent more than a year building strategic stockpiles, a move that puzzled many observers at the time and has now paid off. Data from Kpler, the energy research firm where I work, shows China’s onshore crude inventories stood at 1.232 billion barrels at the end of April and have remained broadly stable since, compared with 1.217 billion barrels in mid-March when seaborne imports first began to ease. Despite imports falling to 8.4 million barrels a day in April from pre-war levels of around 11.7 million, China has not yet tapped its Strategic Petroleum Reserve.

US efforts to pressure China into halting purchases of Iranian crude have so far failed. Smaller Chinese “teapot” refineries continue to buy the bulk of Iranian barrels on offer at heavily discounted prices and under favourable terms. In response, the US Treasury has imposed successive rounds of sanctions on Chinese firms. Beijing has condemned those measures and instructed its companies to ignore them. Any further Trump demands for China to stop buying Iranian oil are unlikely to produce better results. US sanctions policy does not align with China’s national interests, and Beijing is unlikely to jeopardize its energy security because of American pressure.

Trump’s move into Venezuela in January, and the expansion of US influence over parts of its oil export infrastructure since then, represented a strategic setback for China, which had long relied on discounted Venezuelan crude. If Iran’s oil sector also came under greater US control it would represent another major strategic loss for Beijing that it is determined to avoid.

For China, time remains a strategic asset. As long as it can protect its energy security and avoid direct confrontation, a prolonged standoff between Washington and Tehran may be viewed less as a crisis to solve than as a geopolitical balance to manage. That is why expectations for a breakthrough on Iran, or the reopening of the Strait of Hormuz, during this visit should remain low.

Amena Bakr is the Head of Middle East Energy & OPEC+ research at Kpler, an independent global commodities trade intelligence company.