China Unfazed by Trump's Economic Pressure Campaign Against Iran

The Trump administration's 'economic D-Day' against Iran has been met with skepticism by China. The US Treasury Secretary, Scott Bessent, declared that the new sanctions and pressure campaign aim to sever every economic lifeline sustaining the Iranian regime. However, he conveniently omitted mentioning China as Iran's single greatest lifeline.

China is the largest buyer of Iranian oil, with estimates suggesting about 90% of Iran's oil is shipped there through a network of 'shadow fleets'. Beijing also provides access to the Cross-Border Interbank Payment System (CIPS), which facilitates bank transfers outside of the US dollar system. The volumes have increased from 680 billion renminbi per day to 790 billion RMB since the Iran war began.

Beijing has signalled that it is ready to retaliate if the US targets Chinese companies. China has recently armed itself with a legal framework for retaliation, invoking its 'blocking rules' in May in response to US sanctions on several of its biggest independent oil refineries. These rules effectively prohibit any companies from complying with US sanctions on Iran.

Most importantly, Beijing knows it has an ace in the hole, its ability to escalate competition with Washington. China can impose a ban on rare earth exports, which brought some US sectors to a standstill last year and forced Trump to climb down on Chinese tariffs. The US struggles to reduce its reliance on China for these resources.

Beijing is willing to call Washington's bluff, as the US has yet to go after significant Chinese banks supporting refineries or dismantle the intricate system funneling funds to Iran. In Beijing's view, nothing in the recent US announcement signals a serious desire to escalate sanctions.