China has oil options if the US gets squeezed

Beijing isn’t sending jets or missiles into the Middle East right now, but it’s watching very closely. As the US bombed Iranian nuclear facilities on Saturday, joining the fight between Israel and Iran, China kept a low profile.

According to CNBC, it hasn’t condemned the strikes outright, but it has publicly backed Tehran, its long-time partner. And while it’s talking about peace, Beijing could quietly stand to gain if oil flows through the Strait of Hormuz are cut.

China and Iran signed a 25-year partnership deal in 2021. That agreement covers everything: economics, military cooperation, and security. Since then, the two countries have regularly carried out joint military drills.

Iran’s population, around 91 million, gives it more manpower and internal market size than Israel, which has fewer than 10 million people. It also controls huge oil reserves. That made Iran a key part of China’s Belt and Road initiative, which state media like Global Times said was designed to challenge US global dominance.

China has oil options if the US gets squeezed

About 20 million barrels of oil pass through the Strait of Hormuz each day. That’s one-fifth of the world’s total consumption. Roughly half of China’s oil imports pass through the same narrow waterway. But even with that level of dependence, China has already been using alternative setups to avoid sanctions. It pays in yuan, skips Western banks, and uses shipping routes that aren’t tied to the US or Europe.

Evercore ISI economist Neo Wang told CNBC that China likely won’t intervene to stop Iran. “China will likely keep its hands off Iran in any case,” he said. Wang added that China has little influence over Israel, and that more Middle East chaos could benefit Beijing by drawing attention away from the Pacific and the US-China trade war. “It’s a bigger distraction to Washington,” Wang said.

On June 12, when Israel hit Iranian targets, China said the attack was a “violation of Iran’s sovereignty, security and territorial integrity.” But since that first reaction, the government’s tone has shifted. Foreign minister Wang Yi told Israel’s foreign minister that the strikes were “unacceptable,” but he didn’t go as far as condemning them outright.

Analysts at Eurasia Group said China is trying to manage the conflict without getting its hands dirty. It hasn’t condemned Israel by name. It hasn’t broken off talks with anyone. Instead, it’s trying to stay in the middle, defending Iran on paper but still keeping enough distance to look like a neutral player. The analysts said that’s because Beijing wants to stop the war from spreading and messing with its economic interests.

China could live with higher oil prices

US Secretary of State Marco Rubio said over the weekend that China should help convince Iran not to close the Strait of Hormuz. But some policy analysts believe a shutdown might actually work in China’s favor. It could handle the oil supply shock better than the US or Europe.

CNBC pointed out that China’s oil sources are already diverse, as it imports from Russia, Saudi Arabia, Malaysia, Iraq, and Oman. And much of what arrives from Malaysia is actually just Iranian oil with new paperwork.

Robin Brooks from the Brookings Institution said, “China will be happy to see a big spike in oil prices if that destabilizes the US and Europe.” Andrew Bishop from Signum Global Advisors said, “China may not be that irate at paying more for oil from other sources, if it means the US suffers even more.”

Iran’s parliament voted on Sunday to back closing the Strait, so it’s already temporarily closed, but the country’s national security council has the final say. In response, China’s foreign ministry said that keeping the Gulf stable is in everyone’s best interest, but didn’t pressure anyone to back down.

China also weighed in at the United Nations. At a Security Council meeting on Sunday, its ambassador, Cong Fu, attacked the US directly. He said Beijing “strongly condemns” the strikes on Iranian nuclear facilities. He also called out Israel and demanded a ceasefire. “The parties to the conflict, Israel in particular, should reach an immediate ceasefire to prevent a spiraling escalation,” Cong said, as reported in the official readout.

That said, nobody expects Beijing to step in and fix the situation. Andy Rothman, founder of Sinology LLC, told CNBC that he doesn’t believe China will try to negotiate peace between the US and Iran. But he added that China may still be trying to calm Tehran behind closed doors. “Because that would destabilize the region and weaken the global economy, neither of which is in China’s interest,” Rothman said.

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