ENERGYJuly 22, 2026

China is no friend of Iran

Aleksandra Gadzala Tirziu

Reading time: 12 min

China’s ties with Iran are based on utility – and if the costs rise too high, Beijing could set Tehran aside.

The relationship between China and Iran is often cast in the language of alignment – an axis in formation, the scaffolding of a new geopolitical bloc, at times even a strategic friendship. This framing implies a degree of clarity the relationship itself does not, in practice, possess. This has become apparent in Beijing’s posture during the ongoing Iran conflict, which began in February 2026. In April, at the United Nations, Ambassador Fu Cong stated that “China does not go along with Iran’s attacks on Gulf states and the blockade of the Strait of Hormuz.” His remarks followed a call by Xi Jinping to Saudi Arabia’s Mohammed bin Salman in which he urged an “immediate and comprehensive ceasefire.”

Assumptions of loyalty or affinity between China and Iran – particularly on the part of the former – misread the nature of the ties. Chinese engagement with Tehran is better understood as a layered, asymmetric system structured across energy, finance, technology, security and diplomacy, each allowed to deepen or recede without collapsing the whole. It is a system of managed interdependencies, designed to extract benefit while limiting exposure. It is also a subsystem – a functional node – within China’s larger geopolitical architecture. 

What the 2026 Iran conflict reveals, then, is a calibration of that subsystem. Under stress, Beijing is redistributing risk and preserving optionality. Should the range of workable arrangements narrow to the point where the relationship no longer serves China’s interests, Beijing could gradually set Iran aside. 

Beijing’s systems thinking

China does not optimize for relationships; it optimizes for system performance. While much foreign policy analysis proceeds from the assumption that states organize their external ties around alliances or shared ideological affinities, the Chinese leadership operates under a different logic. Its foreign relations are structured by function. The question, therefore, is not with whom China is or is not aligned, but what functions given relations serve within China’s wider geopolitical system in service of its interests.

For the Chinese Communist Party, particularly under President Xi Jinping, the overriding strategic interest is establishing an international environment conducive to “national rejuvenation” by 2049 and the emergence of a “new world order” that would “surpass and supplant the Westphalian system” and position China “center stage.” In pursuit of this objective, Beijing operates an increasingly elaborate hierarchy of foreign partnership designations ranging from ordinary to “strategic partnerships,” “comprehensive strategic partnerships,” “comprehensive strategic cooperative partnerships,” or “coordination partnerships,” and, at the upper end, “all-weather” and “new era” partnerships. 

First introduced on the heels of the Sino-Soviet split and the gradual retreat from Maoist revolutionary diplomacy in the early 1980s, this hierarchy has expanded and become increasingly institutionalized under President Xi. China routinely tailors partnership descriptors to individual ties, combining modifiers to yield a highly differentiated ranking comprising at least 42 distinct formulations.

Since 2016, Iran has been designated a “Comprehensive Strategic Partnership.” This was operationalized with the signing of the Iran-China 25-Year Comprehensive Strategic Plan in March 2021, which established a framework for bilateral cooperation across energy, trade, infrastructure and technology. Yet as a comprehensive strategic partner, Iran occupies an intermediate position in the partnership hierarchy. It sits above ordinary “friendly cooperative relations” such as those China maintains with Norway and Ghana, but below the more privileged “all-weather strategic cooperative partnership” and “comprehensive strategic partnership of coordination for a new era” it maintains with Pakistan and Russia, respectively. 

In other words, while Iran is important, it is a node within China’s geopolitical system rather than a core pillar. It matters insofar as it contributes to the system’s performance in service of China’s wider strategic interests.

Such an asymmetry in China’s foreign relations affords Beijing flexibility. Bilateral partnerships can be recalibrated without materially compromising overall system performance, while the weakening or loss of a partner does not necessarily precipitate systemic collapse. Yet the resilience of any system lies not merely in differentiated nodes, but in their organization across multiple, partially independent domains capable of deepening, receding and adapting over time. China’s engagement with Iran exhibits such a character.

Iranian functionality

For Beijing, the utility of the Iranian node is organized across energy, financial, technological, security and diplomatic domains. Together, they form a subsystem of managed interdependencies characterized by loose coupling: sufficiently interconnected to reinforce one another yet sufficiently differentiated to allow adaptation under stress. Within China’s wider geopolitical system, they provide Beijing with material gain, discretion and strategic deniability. Such is the function of the Iranian node.

Energy constitutes the subsystem’s foundational domain, supplying the material rationale around which the others are organized and from which they derive much of their utility. Prior to the current conflict, China accounted for some 90 percent of Iran’s oil exports – roughly 13.4 percent of Chinese crude imports. Russia accounted for an estimated 18 percent of Chinese crude imports, while Saudi Arabia and Iraq comprised another 13.8 percent and 11.4 percent, respectively. Iran, then, is important to Beijing’s energy architecture but not indispensable to it.

Indeed, the strategic significance of the energy domain lies not in oil alone, but in the wider set of utilities the energy relationship generates. For example, Iranian crude flows to China operate under persistent Western sanctions – including recent U.S. sanctions on the Persian Gulf Strait Authority, which seeks to control transit through the Strait of Hormuz, as well as sanctions targeting independent Chinese “teapot” refineries that have continued to import and process Iranian crude throughout 2026. This has encouraged the emergence and steady institutionalization of alternative, intermediary financial structures designed to diffuse exposure and preserve transactional continuity – and the wider subsystem – under pressure.

Teapot refineries themselves are illustrative. Concentrated largely in Shandong province and including facilities such as Hengli Petrochemical (Dalian), Shandong Shouguang Luqing Petrochemical and Shandong Jincheng Petrochemical Group, these ostensibly private refineries were first granted access to imported crude through a system of quotas and licenses introduced in 2015. Since then, they have assumed an increasingly important role within China’s energy architecture, processing roughly one-fifth of the country’s oil consumption – much of it sanctioned crude acquired at significant discounts. At various points in 2026, for instance, Iranian heavy crude has traded at $12 below the Brent benchmark, while Iranian light crude has been sold at approximately $8 to $10 per barrel below Brent.

This trade is sustained through a wider, deliberately fragmented ecosystem of sanctions-resistant arrangements. Iranian crude is typically transferred between vessels off the Malaysian coast before entering Chinese supply chains, while payments are routed through Chinese- and Hong Kong-registered front companies, non-dollar banks and controlled accounts. Increasingly, too, settlement is conducted in yuan through the Cross-Border Interbank Payment System (CIPS), a clearing network established by the People’s Bank of China in 2015 to process cross-border yuan payments independently of SWIFT-linked channels.

Daily CIPS transaction volumes, which had fluctuated between approximately $85 billion and $103 billion over the preceding year, rose to roughly $134 billion in March 2026 – a notable increase in the context of the Iran conflict. The fragmented nature of this architecture creates compartmentalization and a more resilient system: while sanctions imposed on one actor might disrupt a particular channel, they are unlikely to compromise the wider network. At the same time, this arrangement allows Beijing to refine alternative channels of exchange that may eventually contribute to the construction of its desired new world order. Herein lies its value.

Together with Iran, as of January 2025 Russia, Saudi Arabia, Venezuela, the United Arab Emirates and Egypt were among the states increasingly settling portions of their trade with China in yuan through CIPS. Saudi Arabia and the UAE, Iran’s principal regional rivals, have both cultivated consequential if at times complicated ties with Beijing – the reality of which has become increasingly apparent during the current conflict. 

Despite its condemnation of Iranian missile strikes on its territory, for instance – strikes that were likely aided by Chinese satellite technology and geospatial intelligence – Riyadh remains engaged in discussions with Beijing over acquiring low-cost counter-drone systems, adding to its growing inventory of Chinese unmanned aerial systems and defense capabilities. Like the Iranian node, Beijing’s ties with Riyadh span multiple domains, from energy to defense, technology, infrastructure and finance. The same holds true for its ties with the UAE. These relations allow Beijing to engage Iran without becoming captive to it.

Indeed, Beijing’s main interest in the Middle East is not Iran. It is invested neither in Iran’s victory nor in that of Saudi Arabia, the UAE or any other regional actor. Rather, China’s interest lies in the preservation of a regional equilibrium in which no actor becomes so dominant – or so isolated – that Beijing is forced into exclusive alignment. It is through such an equilibrium that China can secure the access, influence and strategic footholds necessary to advance its broader vision of the international order.

The utility of the diplomatic domain within the Iranian subsystem, then, derives not from the China-Iran relationship itself, but from Beijing’s ability to embed it within a wider network of regional ties that affords the flexibility to recalibrate its posture as conditions evolve. It was this very flexibility that was on display in Ambassador Fu’s remarks at the UN and President Xi’s phone call to Saudi Crown Prince Mohammed bin Salman. Faced with mounting regional tensions, Beijing did not retreat into its relationship with Iran but rather sought to preserve balance among the regional nodes upon which its wider strategic interests depend. The need for such equilibrium is not a complement to the Iranian node, but a constraint upon it.

The limits of the Iranian node

For China, Iran’s value is relative, not absolute. From a technological and security standpoint, Tehran offers Beijing opportunities for dual-use cooperation, capability development and the advancement of its Global Security Initiative – its blueprint for reshaping global security governance. Yet, Saudi Arabia, the UAE and other regional actors likewise provide avenues through which similar objectives may be pursued, often at lower political and economic risk. 

Like any node within a wider system, the utility of the Iranian subsystem depends on the advantages it affords Beijing relative to other differentiated nodes. Its resilience rests upon the range of configurations through which those advantages can be maintained as conditions evolve.

Should Western sanctions intensify, for instance, can China further redistribute financial activity through intermediaries and deepen CIPS integration? Should Tehran’s behavior become increasingly costly, can Beijing further distance itself diplomatically while preserving select channels of energy, technology and security cooperation? The critical question is whether a point exists beyond which such adaptations would cease to generate sufficient strategic advantage.

The short answer is yes.

Such a point is unlikely to emerge through the failure of any single layer. Rather, it would likely arise through the accumulation of pressures across multiple domains, steadily narrowing the range of configurations through which the subsystem generates utility. Because the various domains of the Iranian subsystem are only loosely coupled, constraints in one layer have so far been offset through adaptations in others. 

Amid recent U.S. sanctions targeting Chinese teapot refineries, including Hengli, for example, Beijing responded by expanding yuan-denominated settlement through CIPS and invoking its first-ever blocking order under its 2021 Blocking Statute. The order declares that the U.S. sanctions “shall not be recognized, enforced, or observed” within China. Beyond preserving individual commercial relationships with Iranian entities, the measure aims to preserve the subsystem’s broader adaptive capacity. 

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Yet should such compensations become increasingly difficult to sustain, with each successive adjustment yielding diminishing returns, the subsystem would approach its functional limit. Iranian energy could become either physically disrupted or commercially less attractive relative to alternative suppliers. U.S. and Western sanctions enforcement could grow increasingly precise, with financial compartmentalization proving progressively less effective. Regional balancing could become more difficult to sustain and Iran itself could turn into a source of persistent instability. 

Individually, none of these developments would necessarily threaten the subsystem. Together, however, what had functioned as a source of systemic resilience would become a source of untenable tradeoffs. Efforts to sustain Iranian energy flows could jeopardize relations elsewhere in the region. As sanctions enforcement would render the China-Iran network progressively more visible, preserving financial discretion could require greater complexity, diminishing the economic advantages that originally justified the arrangement. Expanded technological cooperation could likewise erode the strategic deniability that had comprised the subsystem’s benefits. Under such conditions, continued adaptation would cease to generate sufficient utility to justify its costs.

At that point, with its utility diminished, Beijing would be much less willing to maintain the Iranian subsystem. This would not necessarily mean that the relationship would collapse outright. Diplomatic recognition and selected forms of cooperation would likely persist. Yet the subsystem itself would no longer perform the functions that had originally justified its maintenance. Deprived of strategic utility, the Iranian node would lose its place within China’s wider geopolitical architecture and, in time, be set aside.

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