Trump's Economic War on Iran Hinges on China, But Xi Jinping May Not Cooperate

The United States' "Operation Economic Outcast," designed to impose damaging sanctions on nations continuing business with Iran, hinges critically on China's participation, yet securing Beijing's cooperation presents a significant challenge. China remains a vital economic partner for Tehran, purchasing the majority of its oil exports, valued at tens of billions of dollars annually, alongside other trade.

Beijing has consistently rejected what it terms "unilateral" U.S. sanctions, asserting its right to maintain normal trade relations with countries like Iran and Russia. Furthermore, China likely perceives that Washington would hesitate to provoke a broader economic confrontation that could negatively impact both nations, especially with U.S. mid-term elections approaching. Following the announcement of the U.S. sanctions initiative, China's Foreign Ministry declared it would "take all necessary measures" to protect its "own legitimate rights and interests."

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China is unlikely to accept a situation in which Washington determines what Chinese companies can legally trade with third countries.

Chinese analysts suggest limited room for accommodating Washington's demands. "China is unlikely to accept a situation in which Washington determines what Chinese companies can legally trade with third countries," stated Zhao Long, director of the Institute for International Strategic and Security Studies at the Shanghai Institutes for International Studies. He added that such a precedent could allow U.S. secondary sanctions to dictate China's commercial dealings with other nations.

China procures Iranian oil through a discreet system designed to bypass the U.S. dollar and sanctions. Private refineries, often referred to as "teapot" refineries, process sanctioned Iranian crude using a network of ports, financial institutions, and tankers that are generally insulated from international scrutiny. This intricate system highlights China's capacity to circumvent U.S. economic pressure.

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Economic warfare and maximum pressure will not help resolve the issue; they will only further intensify tensions and conflicts, create spillover risks, disrupt the global economic and financial order.