The US is putting increasing pressure on Iranian oil sales before President Donald Trump's high-stakes visit to China, the world's largest crude importer.
On the day before Mr Trump left for Beijing, the Treasury Department hit Tehran with its latest round of sanctions on Chinese purchases of Iranian oil. The punitive measures were the latest instalment of Washington's Economic Fury campaign against Iran's so-called shadow fleet and banking system.
While this sanctions campaign is aimed directly at Iran's economy, it is also penalising China, which for years has been the Opec producer's top buyer of oil. China bought on average 1.38 million barrels of oil a day last year, representing more than 80 per cent of Iran's oil exports, according to Kpler.
The sanctions campaign makes for an awkward backdrop to Mr Trump's meeting with Chinese President Xi Jinping, who thus far has remained on the sidelines as the US seeks to gather support to end Iran's effective closure of the Strait of Hormuz. Traffic has ground to a virtual halt in the strait, through which about 20 per cent of the global oil and gas supplies travel.
"It doesn't look like there is any sign right now that sanctions on Iran, and therefore everything connected to China as well, are being dropped. So it puts a bit of an unpleasant flavour in everyone's mouth," said Stephen Fallon, founder of DBM Consulting.
Defiant stance
China has taken a defiant stance towards the latest US sanctions policy. Last week Beijing activated a 2021 blocking statute that directs companies and citizens not to comply with US sanctions. The order came after Washington imposed punitive measures on one of China's largest "teapot refineries", which are privately owned refineries based in the Shandong province, which China uses to import discounted Iranian and Russian crude.
The public order from China, which for years has flouted US sanctions, marked its most aggressive approach towards US economic statecraft.
Ali Wyne, senior research and advocacy adviser for US-China relations at the International Crisis Group, said the order's significance lies in the message that it sends.
"China is increasingly confident in its capacity to withstand severe, sustained economic pressure from the United States," Mr Wyne said.
The administration has been playing down expectations about the attention Iran will be given on Mr Trump's trip, the first US presidential visit to China since his first term in 2017.
"We’re either going to make a deal or they’re going to be decimated one way or the other," Mr Trump said.
While he has said his meeting with Mr Xi will be "a little bit about energy, and about the very beautiful country of Iran", it is unlikely there will be results with respect towards the White House sanctions policy. Instead it is anticipated agreements will be made on a board to help manage trade between the two countries, as well as agriculture and aerospace that could involve China's aircraft maker Comac.
Addressing vulnerabilities
Mr Trump's visit comes as he threatens to extend a lengthy blockade on Hormuz. China is not immune to disruptions in the Middle East, for which it receives more than half of its imports. China's oil imports fell 20 per cent in April to their lowest level since 2022, Reuters reported, quoting customs data.
Despite this, Chad Bown, a senior fellow at the Peterson Institute for International Economics, said Beijing has used numerous approaches to reduce its dependence on foreign partners, including by stockpiling oil and developing renewable energies such as wind and solar.
Clean-energy technologies contributed to 11.4 per cent of China's economy last year, according to a Carbon Brief analysis.
"The diversified energy mix means that China is no longer dependent on a dominant source of energy or a dominant supplier country for energy imports," said Nasser Saidi, president of Nasser Saidi and Associates.
The US has also been racing to catch up with China in the race for the world's critical minerals. China accounts for 70 per cent of the world's rare-earth minerals mining and 90 per cent of processing.
"The West has a lot of work to do on critical minerals to tackle China’s strangleholds, including learning which minerals it makes sense to stockpile, how to establish and sustain alternative mining and processing facilities outside of China, and to ensure demand for those minerals, which would inevitably be at a higher price than their Chinese competitors," Mr Bown said.
Sarmad Khan contributed to this report from Abu Dhabi
