The Islamic Republic’s overreliance on oil sales to China exposes it strategically while the mass import of cheap goods undermines local industry.
When the Iranian owner of an auto-parts factory traveled to Germany to negotiate a new production line over ten years ago, he found suppliers unwilling to absorb even minor costs associated with doing business with Iran. Eventually, sanctions pushed him toward China instead. There, he says, the reception was warmer and the willingness to trade far greater.
But that experience also crystallized what he sees as the central failure of Iran’s relationship with China. Beijing has become Iran’s most dependable oil customer and one of its most important commodity suppliers, yet the relationship has produced little meaningful investment or technology transfer. “Imports from China have helped ensure that the market does not suffer from shortages, but this volume of imports has devastated domestic production,” the factory owner told Resanegar, Tehran Bureau’s economic unit. Without investment, he said, the relationship has remained little more than an exchange of Iranian oil for Chinese goods, a model that keeps shelves stocked but weakens Iranian industry.
The industrialist’s perspective illustrates where Iran stands in its relationship to China, which has come under scrutiny ahead of a planned September 24 meeting between the US and Chinese heads of state.
Throughout the country’s current conflict with the United States and Israel, Iranian officials have described China as a strategic partner capable of helping the Islamic Republic withstand Western economic and political strain. But a closer look at Iran’s energy exports to China and foreign direct investment figures reveals a relationship that looks less like an alliance than an economic dependency that has been developing for over 20 years.
Abandoned by sanctions-wary European partners and crippled by internal economic problems, Iran has spent the last two decades turning to China as a strategic partner in both security and economic development. But war and the regime’s continued blockade of global shipping lines, alongside long-term corruption issues and obstructions to foreign investment, have dampened the strength of that relationship. “The problem is not on the Chinese side that the relationship has remained limited to selling oil and buying low-quality Chinese goods,” said the industrialist. “The problem is on the Iranian side. Instead of encouraging investment and dismantling the complicated bureaucracy that prevents investment, Iran is focused only on getting through its immediate day-to-day problems.”
As Iran looks to China for support in its ongoing conflict with the United States and Israel, Iran’s historic failure to advance its relationship with China beyond oil-for-goods deals and on-paper cooperation agreements shows that this much touted “strategic partnership” has its limits.
Iran’s foreign minister, Seyed Abbas Araghchi, traveled to Beijing on September 16 to confer with his Chinese counterpart, Wang Yi. The meeting took place days ahead of Chinese president Xi Jinping’s anticipated visit to Washington, DC, where talks over longstanding issues—trade, tariffs, Taiwan, and technology (now including the emergence of powerful artificial intelligence)—will doubtless be accompanied by discussions of Iran and insecurity in the Strait of Hormuz. While Washington is hopeful of winning Beijing’s help in influencing Tehran, China is unlikely to hand Trump its most important source of leverage in this crisis without extracting concessions in return.
“I don’t think China will go very far in stepping in, but I do expect Xi’s foreign policy team to try to ease tensions between the US and Iran,” Vivian Wu, founder of the Sinophone news platform Dasheng Media and a former BBC World News China editor, told Resanegar. “There may also be some mediation behind the scenes, but I wouldn’t expect major commitments to Iran. I think Beijing cares more about managing its relationship with Washington and is unlikely to put that at serious risk for Tehran’s sake. Of course, it will still defend what it considers China’s sovereignty and national interests.”
One big partner
China remains the largest buyer of Iranian oil, an important source of manufactured goods, technology, and infrastructure, and one of the few major economies still willing to maintain extensive commercial relations with Tehran under US sanctions. But that dependence has never been reciprocal.
In 2025, China was purchasing about 90 percent of Iran’s exported oil—roughly 43 million barrels each month—making Beijing vastly more important to Tehran than it had been when the earlier sanctions regime first began reshaping the relationship. Yet Chinese investment in Iran has remained surprisingly modest. Despite years of announcements and various oil field development schemes, total Chinese investment in Iran has been estimated at less than $5 billion, far below Chinese investment in Saudi Arabia or the United Arab Emirates. Official Chinese figures put bilateral trade in 2024 at $13.37 billion, with China exporting $8.93 billion worth in goods to Iran while importing $4.44 billion.
In 2021, the two countries signed an expansive pact, the 25-Year Comprehensive Cooperation Plan. At the time, the sweeping strategic framework for economic and security cooperation was criticized by Iranian businessmen and members of the public, who argued the agreement turned Iran into a Chinese economic vassal without providing much in return. Regime officials, meanwhile, presented the 25-year plan as a major geopolitical victory obligating China to protect Iran’s interests on the international stage.
Beijing has consistently supported Iran where doing so serves Chinese interests while avoiding commitments that would require it to absorb Iran’s political, military, or sanctions risk. The 25-year plan between Iran and China does not, by itself, appear to create specific enforceable obligations for either party.
“With or without this signed agreement, China would have supported, and continues to support, stability in energy markets, reduced tensions in the Strait of Hormuz, and maritime security,” an economic analyst in Iran, who works with Iranian research institutions and media organizations and asked not to be named for security reasons, told Resanegar. “This has little to do with the 25-year cooperation agreement.”
There was never, he noted, a security provision in that agreement obligating China to defend Iran militarily. “Rather, the document primarily established a framework for cooperation,” he added. “I do, however, have reliable information that the Chinese side was unhappy about the widespread criticism within Iran surrounding the signing of the agreement and has accused Iran of failing to do enough to advance it.”
Hossein Marashi, secretary-general of Iran’s Executives of Construction Party, recently claimed that China had made a meeting with Majles speaker Mohammad Bagher Ghalibaf, Iran’s special representative for implementing the 25-year agreement, conditional on four demands: “reopening the Strait of Hormuz, refraining from charging ships tolls, resolving the issue with Saudi Arabia, and resolving the issue with the United States.” The economic analyst observed:
“Ghalibaf’s office denied the claim, and China has issued no document or official position confirming it. Nevertheless, the substance of the alleged conditions overlaps significantly with China’s publicly stated interests in reopening Hormuz and reducing regional tensions. China does not necessarily mind watching the United States become bogged down in the Strait of Hormuz, but it does not want a global economic recession or Chinese companies exposed to the risk of US secondary sanctions.”
He continued:
“China supports Iran politically and economically. If supplies cannot be delivered by sea, it will meet some of Iran’s basic needs through overland routes. But implementing the provisions of the 25-year cooperation agreement requires greater effort by Iran, the normalization of Iran’s foreign relations, and an end to Iran’s complete isolation. China will not invest in a country facing this degree of international and regional crisis, because the risks are too high, Chinese companies would be exposed to US sanctions, and it would further intensify tensions between China and the United States.”
The analyst sees Chinese companies’ dependence on and commercial ties with the United States, Iran’s complex bureaucracy, internal divisions within Iran, and the lack of investment security as the principal reasons the 25-year agreement has failed to produce significant results.
For Iranian officials accustomed to describing China as a strategic counterweight to the United States, the limits of the partnership have become increasingly difficult to ignore. Beijing has called for a ceasefire and a return to negotiations and has supported regional diplomatic efforts. But it has not formally assumed the role of Tehran’s protector or direct mediator with Washington. Even the diplomatic choreography has been restrained: President Masoud Pezeshkian failed to secure a formal bilateral meeting with Xi Jinping at either of the two most recent Shanghai Cooperation Organization and BRICS summits, with their interaction at the former confined to a brief conversation on the sidelines.
Maritime blockades
Regime officials have indicated the ongoing maritime blockade in the Strait of Hormuz as a reason for China to step into a more active role as a mediator between Iran and the United States. For Iran, the blockade and disruption to Iranian oil exports threaten one of Tehran’s principal remaining sources of foreign revenue. For China, however, losing Iranian supply is costly and inconvenient, but not existential.
“What worries China is a prolonged shipping crisis and a deepening global economic recession, which could reduce Chinese exports,” the Iranian analyst said.
China remains heavily dependent on imported crude, but it has considerable buffers. Its onshore oil stocks stood at about 1.23 billion barrels in early September, according to Reuters, while domestic production was running at roughly 4.3 million barrels a day. Beijing has also been replacing disrupted Middle Eastern supplies with crude from Russia, Africa, Canada, and South America.
That makes the blockade far more dangerous for Iran than for China. Beijing can draw down inventories, cut refinery runs, and switch suppliers; Tehran, by contrast, risks losing its principal oil customer and source of foreign revenue. The analyst argued that this imbalance helps explain Iran’s efforts to raise the regional costs of the conflict, including through pressure around the Bab el-Mandeb, the chokepoint between the Red Sea and the Indian Ocean. While the Iran-allied Houthis have recently asserted control over the strait, it is difficult for the Islamic Republic to maintain any direct coordination with them.
Meanwhile, the US counterblockade of Iranian ports has disrupted both sides of the oil-for-goods relationship, but not equally. Iranian oil exports to China have fallen sharply, from an average of about 1.4 million barrels a day in 2025 to roughly 534,000 barrels a day in August, according to Kpler data cited by Reuters. Chinese goods have continued to reach Iran through a barter-like system that converts oil revenues into credits for Chinese imports, insulating trade from the international banking system, according to Reuters. However, the arrangement ultimately depends on Iran continuing to sell oil. As the blockade cuts those exports, it also constrains Tehran’s ability to finance future imports from China.
Leveraging the crisis
Some Iranian media have interpreted China’s changing oil purchases as evidence that Beijing is using the crisis to increase its leverage over Washington. The reformist-aligned Etemad newspaper, for example, argued that China first sharply reduced crude imports and then began raising them again, giving Beijing the ability to influence oil prices as the Trump administration sought to contain the economic fallout from the war.
The underlying trend is real, though the interpretation is harder to prove. Chinese crude imports fell to a near-decade low of 7.12 million barrels a day in June before recovering to 8.41 million in July and 8.93 million in August, according to Chinese customs data cited by Reuters. The decline reflected disrupted Middle Eastern supplies, high prices, weak Chinese demand, and reduced refinery activity; it was not established as a deliberate attempt to pressure Washington.
Still, the theory is revealing of how Beijing’s behavior is being read in Tehran. One Iranian economic analyst interviewed by Resanegar said China had little reason to deploy its influence without “extracting concessions from the United States” and gaining “international prestige” in return. He argued that Beijing is in position to press both sides, able to “use America’s weakened position” to push Washington for concessions while also persuading Iran to reduce instability in the Strait of Hormuz.
Beijing has clear interests in restoring normal shipping conditions, containing energy prices, and preventing a wider regional crisis, but those interests do not necessarily align with Tehran’s. Wu, of Dasheng Media, acknowledged that “oil plays a role” in China’s policy calculations, but it would be wrong to overemphasize its importance to Beijing. “China won’t be happy to find the Strait of Hormuz blocked forever, as it will lead to more chaos,” she said. “China always states that it hates chaos, which is true.”
“No long-term perspective”
Back in Tehran, there is growing concern that regime insiders will simply exploit the relationship with China for personal gain. Despite signing contracts worth more than $80 billion, China has failed to begin work on many of the Iranian oil fields it pledged to develop since 2004. At the same time, Chinese individuals have registered dozens of oil and gas companies and more than 45 patents in Iran, often with the involvement of local business partners, previous reporting by Tehran Bureau has shown.
The industrialist argues that the deeper problem lies on the Iranian side, where traders and politically connected intermediaries often prioritize short-term profit over technology transfer or industrial development. “They have no long-term perspective,” he said.
He recalled one Chinese manufacturer telling him that, while European and American buyers tended to seek higher-quality Chinese products, Iranian traders routinely pushed for the cheapest goods available. In some cases, these products were intended for China’s own lower-income domestic market rather than export.
“The Chinese know that, because of our political and international problems, we face many restrictions, and even so they are still willing to work with us,” he said. “But Iran’s economy has fallen into the hands of profiteers, and they think only about their own personal interests. As long as this situation continues, neither China nor any other country will invest in Iran.”