Nearly 14% of China’s oil imports this year have come from Iran, a country under heavy US sanctions. According to new figures from data intelligence firm Kpler, China is the biggest buyer of the country’s oil globally, accounting for 90% of Tehran’s seaborne crude shipments.
This dependence means that China, the world’s largest crude importer, is uniquely vulnerable to any disruption in the Middle East, where tensions remain high. If the fragile peace between Israel and Iran were to falter, the economic ripple could hit Chinese refineries, energy markets, and consumers alike.
Yet for now, Beijing is willing to make the deal. China saves billions of dollars annually by buying oil from Iran, Venezuela, and Russia, all sanctioned by Western powers. For instance, the country’s light crude trades at up to $7–$8 cheaper per barrel than non-sanctioned Middle Eastern oil.
The teapots turning sanctions into savings
China’s small-scale, privately owned refineries, known as “teapots”, are at the centre of this trade. Mostly based in Shandong province, these refineries make up a quarter of the country’s refining capacity but often operate on razor-thin or negative margins.
Teapots are attracted to the steep discounts Iranian oil offers. For July deliveries, Iranian crude was priced $3.30–$3.50 below ICE Brent, a deeper discount than in June, according to Reuters. However, the same discounts come with risks, from tightened US sanctions to limited transparency, as Iranian oil is often relabeled as Malaysian to avoid detection.
Big Chinese state-owned oil companies have avoided Iranian crude since 2018, leaving teapots to take the risk and reap the savings. But even they are cautious: three were hit by US sanctions in recent years, and some mid-sized independents have scaled back imports.
A political, economic, and moral balancing act
China’s stance remains firm; it rejects unilateral US sanctions and defends its Iranian oil trade as “legitimate business.” But Beijing walks a fine line. With no Iranian oil listed in Chinese customs data since July 2022, shipments are disguised, often transshipped through Malaysia, a known hub for veiled oil flows.
This cloak-and-dagger energy strategy may save China money, but it’s also tying its fuel security to geopolitics.
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