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The US has unveiled an expansion of sanctions that it says will cut off Iran’s economic lifeline but stopped short of the most punishing measures, instead putting the world on notice to cease doing business with the Islamic republic.
Treasury secretary Scott Bessent warned other countries would need to sever business ties with Iran or risk being forced out of the dollar-based financial system. He previously urged cooperation from China – the biggest buyer of Iranian oil for several years – although the US blockade of Iran’s ports, renewed in mid-July, has already cut much of the Iranian oil flows to China.
Experts say Washington is wary of Chinese retaliation for any sanctions on its banks ahead of expected talks next month between US president Donald Trump and Chinese leader Xi Jinping, with any curbs on China’s exports of critical minerals especially sensitive.
What do the new moves by the US mean for China and oil and how might Beijing respond?
How much oil does China buy from Iran?
Through the early weeks of the war Iran continued to ship to China, with Beijing’s imports of Iranian crude slipping only marginally, according to Kpler ship-tracking data, from 1.57m barrels a day in February to 1.47m barrels a day in March.
Since then imports have dropped dramatically. The US renewed its blockade of Iran’s ships and ports in July in an attempt to cut off oil sales, as a deal to halt their war broke down.
Shipments fell to 785,000 barrels a day in June – the lowest since February 2023 – but then rose slightly in July to 823,000, provisional Kpler data showed. The intake so far in August has dropped to 534,000.
Who are the Chinese buyers?
Chinese independent refiners have been the main Iranian crude buyers, attracted by what has typically been a steep discount to mainstream barrels. Known as “teapot” refineries, they survive by buying cheap crude wherever they can, turning it into petrol and diesel for neighbouring provinces.
China’s big state refiners have shunned Iranian oil since 2019, when the US reimposed sanctions on Tehran, because they do not want to be cut off from the US dollar-based international financial system. But the teapots, which cater to a domestic market, have no such qualms.
Iranian oil delivered to China has long been branded as Malaysian, and more recently Indonesian, and is settled in Chinese currency, trading in a tight loop involving a chain of difficult-to-track intermediaries, according to refinery sources and traders involved in the business.
Have previous US sanctions been effective?
Washington has intensified its efforts to clamp down on Chinese purchases of Iranian oil since Trump returned to the White House early last year, imposing sanctions on mostly smaller Chinese refiners and other participants in the supply chain, which have in some cases proven disruptive.
The US treasury department has also warned two larger Chinese banks they could face secondary sanctions if Iranian funds were found moving through their systems, but has stopped short of designating them.
In April, Washington imposed sanctions on Hengli Petrochemical (Dalian) refinery, along with about 40 shipping firms and vessels, accusing Hengli of buying billions of dollars’ worth of Iranian oil, escalating its efforts to curb Tehran’s oil revenue. Hengli has denied buying Iranian oil.
In the past, however, sanctions themselves have done little to slow overall flows of Iranian oil into China.
Asked about Chinese banks on Monday, US treasury secretary Scott Bessent said: “We want to make clear here today that no one is above the reach of US sanctions.”
What have China and Iran said?
The Chinese foreign ministry said sanctions and pressure tactics did not help and Beijing would do what was necessary to protect China’s interests.
China, which has said it rejects unilateral sanctions, has called for a resolution through diplomatic and political means.
Iranian economy minister Ali Madanizadeh told state television that neither China nor Russia had “accepted” the US measures, and predicted other countries would resist them.
He said: “Naturally, the enemies intend to launch an economic terrorist attack on us, but we also have our own tools and know how to play the game.”
With Reuters
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