As the Donald Trump U.S. administration said it would launch an unprecedented "economic isolation" operation against Iran, some say the response of China, the largest buyer of Iranian crude, will determine the success or failure of the operation.
U.S. Treasury Secretary Scott Bessent said in a CNBC interview on the 20th (local time) that he will hold a news conference on the 24th to unveil plans to economically pressure Iran, saying it "will be the most powerfully coordinated operation of economic isolation in world history." He added that he would tell allies, "You are either with us or against us," saying, "It is time to decide."
President Trump also warned the previous day that "any country that allows its financial institutions, corporations, airports or government agencies to provide any form of lifeline to Iran will pay a tremendous economic price." He added, "All of this—oil smuggling, currency swaps, cash remittances, exchanges, ship registration, shell companies—must stop right now." Observers say the remarks were aimed at China, which buys most Iranian crude.
China is the largest buyer of Iranian crude, purchasing about 90% of Iran's oil exports. Since the war began in February, the United States has sanctioned some small Chinese refiners, but it has not sanctioned major Chinese banks that support oil transactions with Iran. Without sanctions against China to back it up, completely cutting off Iranian oil transactions would be difficult, and the effect of U.S. economic pressure on Iran could be limited.
Bloomberg said that "the biggest test of whether the United States has the will to actually push through with this policy is China." It cited as variables that Chinese President Xi Jinping is scheduled to visit the United States next month and that the United States and China, the world's two largest economies, are maintaining an unstable trade truce.
Xi is scheduled to visit the United States next month to coincide with the U.N. General Assembly. It will be the first visit by a Chinese leader to Washington in 10 years. In this situation, if the Trump administration takes measures targeting China to enforce Iran sanctions, U.S.-China tensions risk flaring again. The New York Times (NYT) also noted that if the United States sanctions China and other buyers of Iranian crude ahead of Xi's visit in September, U.S.-China conflict could reignite.
If China retaliates by restricting rare earth exports, it could also hit the U.S. economy, making it hard for the United States to strongly pressure China for Iran sanctions. In particular, if U.S.-China tensions intensify again ahead of the November midterm elections, where kitchen-table economics have become the key issue, it could be a significant political burden for President Trump, whose approval rating has been plunging as the Iran war drags on.
Chris Kennedy, an analyst of economic sanctions and economic security policy at Bloomberg Economics, said, "The question is whether the United States is willing to prioritize a new economic war over its relationship with China," adding, "If it does, serious repercussions will follow."
Brett Erickson, head of Obsidian Risk Advisors, also said, "No matter what the Trump administration puts on the table, it will be difficult for President Xi to capitulate to President Trump on such a public and consequential issue." Regarding the U.S. demand to cut ties with Iran, he said, "It is asking China to voluntarily allow the United States to decide who it can transact with and who it cannot," adding, "China has no intention of setting such a precedent."
Another problem is that, beyond China, there are other countries that have supported Iran's economy through trade. According to data compiled by Bloomberg, Türkiye, a North Atlantic Treaty Organization (NATO) ally of the United States, is the biggest buyer of Iranian products after China. India, a strategic partner of the United States, is also a major trading partner that supplies food and pharmaceuticals to Iran.
Claire O'Neill McCluskey, a former U.S. Treasury official who co-founded the sanctions advisory firm Clarity Compliance Consulting, said, "At this point, broad public threats alone are unlikely to change the behavior of third countries."