Current status of Iran-China Trade

Trade became increasingly difficult to track as China underreported its purchases of Iranian oil to avoid US sanctions. Its companies reportedly continued to buy Iranian oil through intermediaries, many in Malaysia and the United Arab Emirates.

The biggest obstacle to Iran’s trade with China in the 21st century has been the United States—for its economic might and wealth, massive consumer base, and diplomatic clout.

Lately, Iran’s oil exports to China notably trended upward.  But Tehran was forced to sell its petroleum exports at discounted prices to lure businesses that feared US financial penalties on third parties.  

In March 2021, during the final months of Rouhani’s presidency, Iran signed a 25-year strategic agreement focused largely on strengthening economic and security cooperation – with China. “China is a friend for hard times,” said Foreign Minister Mohammad Javad Zarif.  

Chinese Foreign Minister Wang Yi said that China firmly supports Iran in safeguarding its state sovereignty and national dignity. During the announcement in Tehran, he called on the United States to abandon the Iran sanctions and remove its long arm of jurisdictional measures that have been aimed at China, among others.

Iran’s turn to the East accelerated after the election of hardliner President Ebrahim Raisi. Raisi and his team think that the 21st century belongs to Asia and rising powers there, Nasser Hadian, a University of Tehran political scientist, told The Iran Primer. 

Amid the shifting world order, they see China as the leader of an emerging Eastern bloc that includes Russia, Pakistan, and Iran. 

In 2021, Iranian oil exports to China reportedly averaged 818,000 barrels per day, although Beijing did not issue official numbers. For the first five months of 2023, it averaged about 1 million barrels per day.  

By 2023, Tehran sought a strategic relationship with Beijing because of its status as a rising global power and a potential partner in offsetting the impact of Western sanctions. But China primarily viewed Iran as an energy source. Beijing also viewed Tehran as a way to balance its ties—and diversify energy sources—in the volatile Middle East. 

Deepening ties with the Islamic Republic was also a means of ensuring stability in the Middle East, which China relied on for more than half its oil. Beijing worried that extraordinary economic pain in Iran may translate into more aggressive behavior on the international stage, which was a part of the reason for trade with Tehran, Murphy told The Iran Primer. 

Economically, the United States became China’s largest trade partner in the 2000s. By 2022, trade between the world’s two largest economies totaled US$759 billion—or 12% of China’s global trade. In contrast, China’s trade with Iran was slightly less than US$16 billion—or 0.25% of China’s global trade.  

Diplomatically, more than 1,000 US sanctions on Iran—for its nuclear program, missile proliferation, support for terrorism, and human rights abuses—also deterred China from deeper economic integration. Chinese companies face third-party sanctions if they are caught buying goods from Iran.  

Due to both factors, China has increasingly turned to trade with other Middle East countries. Its trade in 2022 with Saudi Arabia, Iran’s biggest rival in the Muslim world, was US$67 billion—or four times larger than the almost US$16 billion trade with Iran.

China’s trade with Israel, Iran’s nemesis in the Middle East, was US$25 billion—or 60% higher than trade with Iran.

“The Iran-China relationship was still quite transactional,” Murphy said. “It is a decreasingly important economic relationship in comparison to other powers in the region. China wants Iran to feel included and not engage in destabilizing behavior.”