China's low-cost crude oil procurement structure is developing cracks after U.S. airstrikes on Iran. With another oil supplier faltering after Venezuela, concerns are growing over energy burdens. However, beyond diplomatic criticism, China is not stepping in with direct involvement such as providing security guarantees for Iran. Foreign media noted a structurally asymmetric relationship, pointing out that Iran accounts for less than 1% of China's trade and only about 13% of its seaborne crude imports.
On the 3rd, market research firm Kpler said China is the largest buyer of Iran's seaborne crude oil. China purchases 80% of total export volumes. Last year, China imported an average of about 1.38 million barrels of Iranian crude per day. China has secured price competitiveness by buying crude at low prices from sanctioned countries such as Iran. But with imports of Venezuelan oil cut off after the ouster of Venezuelan President Nicolás Maduro in January and supplies of Iranian crude now at risk of being blocked, there is an outlook that energy unit costs will rise and burdens will grow.
The Institute for Energy Research (IER), a U.S. think tank, said in a recent report, "With the Maduro regime in Venezuela ousted and Iran's political future uncertain, the structure that allowed China to enjoy advantages could be shaken," adding, "If permanent political change occurs in Iran, China will lose another stable and low-cost source of oil. It will be placed at a strategic disadvantage compared with the United States, the world's largest oil producer."
China's Ministry of Foreign Affairs criticized the U.S. strikes on Iran, saying, "Acts of killing the leader of a sovereign nation and inciting regime change are unacceptable," and the Shanghai Cooperation Organization (SCO), a Chinese-led multilateral political, economic and security forum, flew flags at half-staff to mourn Iran's Supreme Leader Ayatollah Ali Khamenei.
But beyond the Ministry of Foreign Affairs' remarks, China is not taking steps to defend Iran. Major foreign media analyzed the backdrop, saying, "Iran accounts for less than 1% of China's trade, and its share of China's seaborne crude imports is also around 13%, making it hard to view the two as strategic allies."
◇ "Crude connection" Iran depends 80%, China only 13%
According to the Center for Strategic and International Studies (CSIS), China is Iran's largest trading partner, accounting for about one-third of its total trade, but from China's perspective Iran is a small country with less than 1% trade share. For China, Iran is an important crude supplier, but while Iran's dependence on China for crude exports and imports reaches 80%, China's dependence on Iran is only 13%. Bloomberg said, "The relationship between China and Iran is far more asymmetric than many think, and it is closer to a trade partnership based on pragmatism than a deep strategic alliance," adding, "According to Chinese customs data, bilateral trade has also fallen sharply from its peak."
Amid this, China is said to have already stockpiled large volumes of Iranian crude. According to Kpler, more than 46 million barrels of Iranian crude are currently loaded at sea in Asia. About 80% of that is anchored in the Singapore Strait and off China's coast. Bloomberg reported that China stockpiled crude on a large scale last year, including for strategic reserves. Reuters said, "China's February shipments of Iranian crude hit their highest since 2018," adding, "Chinese refiners appear able to withstand short-term supply disruptions thanks to recent record shipments of Iranian and Russian crude and aggressive government stockpiling."
◇ China's investment in Iran stalls… arms sales halted for 20 years
Large-scale investments China promised to Iran have also been limited in actual execution. According to Bloomberg, China in 2021 outlined plans to invest up to $400 billion, but the amount actually carried out is said to be only $2 billion to $3 billion. That is low compared with investments in other countries in the Middle East. Iran, for its part, said in 2023 that there had been "a serious setback" in bilateral relations.
Arms sales have also been halted. Until the early 2000s, China supplied Iran with aircraft, missiles and artillery equipment, but it officially halted arms sales after 2005. Although there have recently been suggestions of support for air defense systems and missile technology, their veracity has not been confirmed, and there have been no cases of Chinese-made weapons being identified on the battlefield yet. However, there is a possibility of supplying dual-use items that can be diverted for military purposes.
Bloomberg said, "China has long pursued a 'dual-track strategy,' maintaining its relationship with Iran while also managing ties with the United States and allied countries in the Gulf," citing Tsinghua University international relations professor She Gangzheng as saying, "Military support is not the approach China takes in this region (Iran)."