Indirect talks between Iran and the United States on the Iranian nuclear program resume today, but prospects for a deal appear slim. U.S. Envoy to Iran Robert Malley, reflecting on the inconclusive talks to date and stressing concern about Iran’s recent technical advances, has cautioned that reaching a new deal might not be possible. Unilateral U.S. sanctions against Iran have failed to produce sufficient bargaining leverage at the negotiating table, in part because of China’s refusal to stop importing Iranian oil, the lifeblood of Iran’s economy.
The Biden administration must pressure China to stop shoring up Iran’s economy if the nuclear talks are to succeed. But convincing China to stop importing Iranian oil requires more than finger wagging; the United States must engage in multilateral diplomacy with major oil-producing states to secure assurances for China that its energy needs will be met if it divests from Iran. In doing so, the United States should appeal to China’s own economic interests as a means of securing Beijing’s cooperation on Iran as nuclear negotiations resume.
Motivated by an interest in both regional stability and access to energy markets, the Chinese Foreign Ministry has sought to frame dynamics in the nuclear negotiations with Iran as a response to misguided U.S. polices, starting with the Trump administration’s decision in 2018 to withdraw from the Joint Comprehensive Plan of Action (JCPOA). China has opposed U.S. unilateral sanctions reimposed on Iran following the U.S. withdrawal from the nuclear deal, which it views as illegal under international law. In April, China’s Foreign Ministry called for the United States to lift unlawful sanctions against Iran and warned against “long-arm jurisdiction over a third party,” a reference to U.S. interference in Chinese-Iran trade relations. The Foreign Ministry reiterated these points in late September, suggesting that talks held with Deputy Secretary of State Wendy Sherman in July to address this matter made little progress.
Stiff opposition to U.S. sanctions on Iran comes at a moment when Beijing is poised to expand its trade relationship with Tehran. China is the world’s largest energy consumer importing roughly 10 million barrels of crude oil per day. China’s energy strategy is in part predicated on diversifying import suppliers. While Iran does not figure among China’s top suppliers, buying discounted Iranian oil and fuel products is an element of China’s diversification policy. There are estimates that China this year has imported an average of 550,000 to 600,000 barrels of Iranian crude daily through August.
Motivated by the goal of price and supply stability, China has established a Comprehensive Strategic Partnership (CSP) with Iran, outlining a path forward for economic and security cooperation. In addition, through a twenty-five-year bilateral agreement, China has pledged to invest $400 billion in Iranian industries in exchange for a steady supply of oil.
It’s important not to overemphasize China’s energy dependence on Iran. Beijing’s top oil suppliers are Saudi Arabia and Iraq, and it has signed CSPs with both countries and the UAE. Moreover, China has exhibited pragmatism in its dealings with Iran, preferring not to directly antagonize the United States. For example, despite Iranian requests, China has complied with U.S. sanctions by not releasing some $20 billion in frozen Iranian assets.
However, Beijing’s diversification strategy and broader ties with Iran suggest China is unlikely to accede to U.S. pressure to stop importing Iranian oil. Indeed, Iran’s geographic position makes it a strategically valuable partner in Central Asia for China’s Belt and Road Initiative, allowing for new development projects and economic initiatives to emerge. Tehran, for its part, seeks to leverage its economic ties to China to withstand U.S. sanctions pressure and improve its bargaining position in the JCPOA negotiations.
The Way Ahead
The United States and China share the goal of preventing Iran from acquiring nuclear weapons, although Beijing views the nuclear issue as a lower priority. Indeed, Beijing wants the Iranian nuclear program dispute resolved in a manner that forestalls U.S. unilateral action against Iran or against China’s ongoing projects or initiatives with Iran. If U.S. unilateral actions, such as sanctions, disrupt Chinese-Iranian trade relations too severely, Beijing may decide to increase its support for Iran.
China probably will not challenge U.S. sanctions directly, but it likely will continue to circumvent those sanctions by buying Iranian oil through third-party countries.
Resorting to more oil-sanctions sticks against China without any carrots to address their concerns could backfire, pushing China closer to Iran. The United States should engage with major Chinese oil suppliers, such as Saudi Arabia, to find ways to reassure China that it will have access to a steady oil supply if it divests from Iran. Additionally, the United States should leverage its relations with oil suppliers such as Kuwait, Brazil, Colombia, and Norway to provide oil-supply carrots that would help China achieve its diversification goals. Washington also could offer waivers to Beijing for certain trade deals with Tehran, potentially on Chinese investment in mining, textiles, and manufacturing (industries targeted by the Trump administration’s 2020 sanctions) or support unblocking some Iranian frozen financial assets in China. It is worth noting that the Trump administration did something similar for Japan and South Korea. While these actions may seem like concessions to Beijing, the reality is that cooperation with China is the best option for preventing Iran from acquiring nuclear weapons. If the United States wants to secure Chinese help to contain the Iranian nuclear program, it will have to address China’s economic interests first.