The United States has unveiled expanded sanctions that it says will cut off Iran’s economic lifeline, but stopped short of implementing the most punitive measures, instead warning the world to stop doing business with the Islamic republic. Treasury Secretary Scott Bessent warned that other countries would have to cut their trade ties with Iran or risk being kicked out of the dollar-based financial system. He previously urged China (the largest buyer of Iranian oil for several years) to cooperate, although the US blockade of Iran’s ports, renewed in mid-July, has already cut off much of Iranian oil flows to China. Experts say Washington fears Chinese retaliation for any sanctions on its banks ahead of talks scheduled next month between US President Donald Trump and Chinese leader Xi Jinping, and that any curb on Chinese exports of critical minerals is especially sensitive. What does the United States mean for China and oil and how might Beijing respond? How much oil does China buy from Iran? During the first weeks of the war, Iran continued to ship to China, and Beijing’s imports of Iranian crude oil declined only marginally, according to Kpler ship-tracking data, from 1.57 million barrels per day in February to 1.47 million barrels per day in March. Since then, imports have fallen dramatically. The United States renewed its blockade of Iran’s ships and ports in July in an attempt to cut off oil sales, when a deal to stop its 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. Entry so far in August has fallen to 534,000. Who are Chinese buyers? Chinese independent refiners have been the main buyers of Iranian crude, attracted by what has typically been a steep discount to conventional barrels. Known as “teapot” refineries, they survive by buying cheap crude whenever they can, converting it into gasoline and diesel for neighboring provinces. China’s large state refiners have avoided Iranian oil since 2019, when the United States reimposed sanctions on Tehran, because they do not want to be isolated from the international financial system based on the US dollar. But teapots, which supply a domestic market, have no such scruples. Iranian oil delivered to China has long been branded as Malaysian, and more recently Indonesian, and is settled in Chinese currency, traded in a tight circle involving a chain of hard-to-trace middlemen, according to refinery sources and traders involved in the business. Have previous US sanctions been effective? Washington has stepped up efforts to crack down on Chinese purchases of Iranian oil since Trump’s return. to the White House early last year, imposing sanctions on mostly smaller Chinese refineries and other participants in the supply chain, which in some cases have proven disruptive. The U.S. Treasury Department also warned two larger Chinese banks that they could face secondary sanctions if Iranian funds were found moving through their systems, but stopped short of designating them. In April, Washington imposed sanctions on the Hengli Petrochemical (Dalian) refinery, along with some 40 shipping companies and vessels. accusing Hengli of buying billions of dollars worth of Iranian oil, stepping up efforts to curb Tehran’s oil revenues. Hengli has denied buying Iranian oil. However, in the past, sanctions themselves have done little to curb overall flows of Iranian oil to China. Asked about Chinese banks on Monday, US Treasury Secretary Scott Bessent said: “We want to be clear here today that no one is beyond the reach of US sanctions.” What have China and Iran said? The Chinese Foreign Ministry said sanctions and pressure tactics did not help and that Beijing would do whatever 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 that other countries would resist them. He said: “Naturally, the enemies intend to launch an economic terrorist attack against us, but we also have our own tools and know how to play the game.”
