Iran's Role in Global Energy Conflict Escalates
Jerusalem Africa Desk ·
Development:According to Telegram intercepts, a recent diplomatic briefing by the Jerusalem Center for Foreign Affairs (JCFA) highlighted the economic and strategic aspects of the conflict involving Iran. Researcher Ella Rosenberg presented an analysis of the situation, suggesting that the ongoing tensions with Iran are, in fact, part of a broader struggle between China and the United States for dominance in the global energy market and trade. Rosenberg noted that most of Iran's oil is currently sold to China through the National Iranian Oil Company (NIOC), making Tehran heavily dependent on Beijing. "When 90% of your oil is sold to China, China effectively holds 90% of your revenue," she stated. The strategic importance of the Hormuz Strait was also emphasized, as it controls trade and energy routes from the Gulf to the rest of the world. Rosenberg pointed out that Iran has become, in effect, China's "frontline" in the global energy conflict. Additionally, some transactions between Iran and China are reportedly conducted using cryptocurrencies and shell companies in the Gulf, according to regional monitoring. "Gulf states are beginning to realize that weak financial regulation works against their own interests," Rosenberg said.
Iran-China Energy Ties Under Pressure as Hormuz Crisis Reshapes Global Oil Flows
China became the dominant buyer of sanctioned Iranian crude, providing Tehran with an essential economic outlet while securing discounted oil for Chinese refiners. But the 2026 confrontation around the Strait of Hormuz has exposed the limits of that relationship — and turned Iranian energy flows into another front in the strategic competition between Washington and Beijing.
Iran’s energy relationship with China has become one of the most important economic dimensions of the wider confrontation surrounding Tehran.
For years, U.S. sanctions progressively narrowed the market for Iranian crude. China emerged as the dominant destination, absorbing more than 90% of Iran’s shipped oil during recent years, according to industry data cited by Reuters.
In the first half of 2025 alone, Chinese buyers took approximately 1.38 million barrels per day of Iranian crude. Much of that oil went to independent refiners — commonly known as “teapots” — concentrated in China’s Shandong province.
That relationship gave Iran an economic lifeline.
It also created a significant concentration risk.
The conflict of 2026 has demonstrated that dependence on one principal customer and one vulnerable maritime corridor can become a strategic weakness when sanctions, military operations and disruptions to the Strait of Hormuz converge.
China Became Iran’s Essential Oil Market
The scale of Chinese purchasing is difficult to overstate.
Reuters estimated in 2025 that China was buying roughly 90% of Iran’s shipped oil. U.S. Treasury Secretary Scott Bessent said in April 2026 that China had been purchasing more than 90% of Iranian oil before wartime disruption intensified.
This does not mean Iran supplied 90% of China’s oil.
The relationship is highly asymmetric.
Iran represented only a fraction of China’s overall crude requirements. In the first half of 2025, Iranian barrels accounted for roughly 13.6% of Chinese crude purchases, according to Kpler data cited by Reuters.
For Tehran, however, China was overwhelmingly important.
For Beijing, Iran was one supplier among a much larger portfolio that also includes Russia, Saudi Arabia, Iraq, Brazil and other producers.
That distinction matters when assessing leverage.
China can attempt to replace Iranian barrels by sourcing more oil elsewhere, although often at higher prices.
Iran cannot replace the Chinese market nearly as easily.
The result is an energy relationship that is strategically important to both states but economically far more indispensable to Tehran.
The “90% of Your Oil Means 90% of Your Revenue” Argument Needs Qualification
Ella Rosenberg, a senior research fellow at the Jerusalem Center for Security and Foreign Affairs, has framed the relationship as part of a wider U.S.-China struggle over energy routes, infrastructure and global trade.
In a JCFA analysis published during the 2026 conflict, Rosenberg argued that the confrontation around Iran should also be understood through the competition between Chinese and Western economic networks. She described Iran as increasingly functioning as a frontline in a larger contest over energy and connectivity.
The thesis is useful, but it requires an important qualification.
If China purchases around 90% of Iran’s exported crude, that does not mean Beijing literally controls 90% of total Iranian state revenue.
Iran receives revenue from taxation, domestic economic activity, petrochemicals, gas, non-oil exports and other sources.
The more defensible conclusion is that China has become indispensable to Iran’s externally generated oil revenue.
That still gives Beijing considerable economic importance.
It does not automatically translate into direct political control over Tehran.
The 2026 Crisis Exposed the Relationship’s Vulnerability
The strategic picture changed dramatically after the escalation of 2026.
Iranian crude exports had risen to approximately 2 million barrels per day in March, according to industry data cited by Reuters.
By August, shipments had collapsed to roughly 220,000–255,000 barrels per day as U.S. maritime pressure restricted Iran’s ability to move crude through regional waters.
China remained Iran’s only major oil customer, but Tehran increasingly struggled to deliver the product.
This reveals an important distinction between having a buyer and being able to reach that buyer.
China may be willing to purchase discounted Iranian crude.
That provides little economic benefit to Tehran if tankers cannot reliably leave Iranian ports or move through contested maritime space.
The bottleneck has therefore shifted.
For much of the sanctions era, Iran’s primary problem was finding mechanisms to disguise transactions and evade financial restrictions.
In 2026, physical movement of the commodity itself became a central vulnerability.
Hormuz Links Iranian Pressure to Chinese Energy Security
The Strait of Hormuz sits at the centre of that vulnerability.
It is one of the world’s most important energy chokepoints, connecting Persian Gulf producers with the Arabian Sea and global markets.
In the first half of 2025, approximately 89% of crude oil and condensate moving through Hormuz was destined for Asian markets.
China, India, Japan and South Korea together accounted for roughly three-quarters of the crude and condensate flows through the strait. More than 20% of global liquefied natural gas trade also crossed Hormuz, primarily from Qatar.
China is therefore exposed to Hormuz disruption far beyond its purchases from Iran.
Beijing also depends on energy supplies from other Gulf producers.
The consequences became visible in 2026.
China’s crude imports fell to 8.1 million barrels per day during the second quarter — 32% below the first quarter — as disruptions around Hormuz drove prices higher and reduced available flows.
China had imported a record 11.6 million barrels per day during 2025.
The crisis therefore creates a paradox.
Iran can threaten a maritime route vital to global energy security.
But China — Iran’s most important economic partner — is also one of the countries most exposed to sustained disruption of that route.
Beijing Has More Options Than Tehran
China has spent years diversifying its energy sources.
It imports crude from Russia and Central Asia through pipelines, receives oil from multiple maritime producers and has accumulated substantial strategic inventories.
The U.S. Energy Information Administration estimated that China’s strategic oil stocks approached 1.4 billion barrels by the end of 2025.
Major Chinese energy companies have also emphasized supply diversification.
PetroChina said in March that only around 10% of its crude oil and natural-gas supplies depended on the Strait of Hormuz, with domestic production, pipelines and non-Middle Eastern sources providing much of the remainder.
This does not make China immune to a Gulf energy shock.
Higher oil prices affect transport, industry, inflation and refinery economics throughout the Chinese economy.
But Beijing possesses significantly more tools for diversification than Tehran possesses alternative markets for its sanctioned crude.
That asymmetry is central to understanding the relationship.
Sanctions Created a Shadow Trading Architecture
The Iran-China energy relationship has also produced an extensive infrastructure designed to avoid sanctions.
Iranian crude has frequently been relabelled or routed through third countries before reaching Chinese refiners.
Reuters has reported that cargoes are often presented as originating in places such as Malaysia, while tanker transfers and opaque shipping practices make the true source of the crude more difficult to establish.
The United States has responded by targeting both Iranian and Chinese companies involved in the trade.
In April 2026, the U.S. Treasury sanctioned the China-based Hengli Petrochemical refinery and approximately 40 shipping companies and vessels that Washington said were involved in moving Iranian petroleum.
The Treasury described Chinese independent refiners as an important component of Iran’s oil economy.
Further sanctions have targeted front companies, shipping operators, exchange houses and financial intermediaries in China, the Gulf and other jurisdictions.
The result is an increasingly complex contest between sanctions enforcement and sanctions evasion.
Iran and China Have Developed Alternatives to Conventional Banking
The financial architecture is evolving as well.
A Reuters investigation published in September described a covert mechanism through which Iranian oil revenues were used to finance Chinese goods and projects without relying on conventional dollar-denominated banking channels.
According to Iranian officials and other sources cited by Reuters, a China-based special-purpose mechanism known as ChuXin helped direct funds generated by Iranian oil toward Chinese exporters and Iranian projects.
The arrangement had reportedly processed approximately $2 billion to $2.5 billion.
This resembles a barter or closed-loop settlement system more than a traditional oil transaction.
Iran supplies crude.
Revenue is retained or redirected inside a controlled network.
Chinese goods or services are then supplied without requiring Iran to repatriate the proceeds through financial institutions exposed to U.S. sanctions.
Such arrangements can make financial pressure less effective.
They do not eliminate logistical vulnerability.
If Iran cannot export enough crude, there is less revenue available to circulate through the system.
Cryptocurrency Is Part of the Network — but Should Not Be Exaggerated
Digital assets are also used in parts of Iran’s sanctions-evasion architecture.
But they should not be described as the principal mechanism through which Iranian oil is sold to China without stronger evidence.
The U.S. Treasury has documented the use of shell companies, exchange houses, foreign accounts, shadow-fleet vessels and other structures to obscure Iranian transactions.
In June, the Treasury identified a network using front companies in the United Arab Emirates and China to disguise Iranian-origin LPG and move it to buyers in Asia.
In July, Washington separately sanctioned what it described as an IRGC-backed maritime payment and insurance structure connected to the Strait of Hormuz that accepted payments in digital assets.
These cases show that cryptocurrency can form part of Iranian financial circumvention.
They do not establish that the bulk of the Iran-China oil trade is settled in crypto.
For Jerusalem Africa, that distinction is important.
Terms such as “crypto financing” can attract attention, but the much larger story involves shipping, commodity trading, shell companies, informal banking structures and jurisdictional arbitrage.
Gulf Financial Centres Are Under Greater Scrutiny
The Gulf is an important part of this financial geography.
Companies registered in jurisdictions such as the United Arab Emirates have appeared repeatedly in U.S. sanctions actions concerning Iranian petroleum and financial networks.
In July, the U.S. Treasury also targeted Iranian exchange houses that it said moved billions of dollars annually for sanctioned Iranian banks through layers of shell companies.
This creates a dilemma for Gulf financial centres.
Their attractiveness depends heavily on open trade, efficient financial services and access to global capital.
Networks that exploit those same systems for sanctions evasion can increase regulatory and reputational pressure from the United States and Europe.
Gulf governments therefore have incentives to maintain commercial openness while preventing their financial infrastructure from becoming a major vulnerability in disputes involving Iran.
The U.S.-China Dimension Is Real — but Iran Is Not Simply Beijing’s Proxy
The broader strategic competition with Washington cannot be ignored.
For China, discounted Iranian oil has offered economic advantages while strengthening access to a major energy producer outside the U.S.-aligned financial system.
For Washington, restricting that relationship simultaneously pressures Tehran’s principal source of foreign currency and tests Beijing’s willingness to expose Chinese companies to secondary sanctions.
Energy has consequently become part of a wider U.S.-China bargaining environment involving tariffs, Russian oil, Iranian sanctions and access to strategic commodities.
Ahead of the September 2026 Trump-Xi summit, sanctions affecting Chinese trade with Iran remained among the issues under discussion between the two governments.
But describing Iran simply as a Chinese proxy would go too far.
Tehran has its own security doctrine, regional objectives and political interests.
China has also shown little desire to inherit direct responsibility for Iran’s military confrontation with the United States.
The relationship is better understood as strategic alignment built around overlapping interests, rather than a command structure in which Beijing determines Iranian policy.
Iran’s Hormuz Leverage May Be Declining
One of the most important developments of recent months is that the strategic value of threatening Hormuz may be changing.
Iran has historically viewed disruption of the strait as a powerful tool because of the volume of global energy that passes through it.
But markets and governments adapt.
Alternative pipelines have been expanded, commercial traffic has developed new procedures, governments have released strategic stocks and naval forces have attempted to maintain shipping routes.
Reuters reported in September that the economic pressure generated by the U.S. campaign was increasingly reducing Iran’s own room for manoeuvre, even as Tehran continued to use Hormuz as leverage.
This creates another paradox.
The longer disruption continues, the more incentive other countries have to build infrastructure that bypasses the strait.
A weapon used too frequently can therefore encourage the world to reduce its exposure to that weapon.
Strategic Assessment: Iran Is Both an Energy Lever and an Energy Vulnerability
The strongest conclusion from the Iran-China energy relationship is not that Beijing now “controls” Tehran.
It is that years of sanctions have created a highly concentrated economic relationship in which the two countries have very different levels of dependence.
Iran needs China as a buyer.
China benefits from Iranian oil but can obtain energy from multiple other sources.
Iran can disrupt Hormuz.
China is one of the largest consumers exposed to that disruption.
Iran has developed sophisticated mechanisms to move oil and money outside Western financial channels.
Those mechanisms still depend on physical cargoes, ships, ports and buyers.
For Jerusalem Africa, several indicators deserve close monitoring:
Iranian export volumes. A sustained recovery from the August collapse would show that Tehran is finding ways around U.S. maritime pressure.
Chinese purchasing. The willingness of independent refiners to continue accepting sanctions risk will determine how useful the Chinese market remains to Iran.
Hormuz traffic. Restoration of normal commercial flows would reduce one of the most important sources of global energy pressure.
Secondary sanctions. Wider U.S. action against Chinese banks, refiners or ports could transform the Iran issue into a larger point of friction between Washington and Beijing.
Alternative settlement mechanisms. Growth in barter systems, special-purpose entities, shadow banking or digital-asset arrangements would indicate that sanctions are pushing trade further outside the conventional financial system.
Alternative energy corridors. Pipelines and overland infrastructure that bypass Hormuz could gradually reduce Iran’s strategic leverage over Gulf energy flows.
The Iran-China oil relationship remains strategically important.
But the events of 2026 have revealed its limits as clearly as its strengths.
China provides Iran with an essential market, while Iran gives Beijing access to discounted energy outside the Western sanctions system. Yet the Hormuz crisis has shown that neither financial engineering nor political alignment can fully compensate for the vulnerability of physical energy routes during war.
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