Washington's new Iran sanctions push tests how much exposure China is actually willing to defend

Washington wants to sever every economic line connecting Iran to the outside world — China is the one line it can't easily cut. The US Treasury launched a sweeping new sanctions push, Operation Economic Outcast, aiming to choke off Iran's economic lifelines globally, widen exposure to secondary sanctions, and set deadlines for countries to wind down Iran-related business, according to a Treasury statement announcing the program. How far Washington can push that isolation without colliding with Chinese commercial and infrastructure interests is the harder question.

China sits on the other end of Iran's biggest remaining equity pipeline — and that's the leverage Washington can't fully touch. China has absorbed roughly 90% of Iran's oil exports, with Iranian crude accounting for around 1.4 mn bbl / d of Chinese imports in 2025, Reuters reported. The blockade is already squeezing that trade hard: Iranian crude loadings collapsed to around 220k-255k bbl / d in August, down from around 2 mn bbl / d in March.

Why it matters: China buys the overwhelming share of Iran's oil and has bankrolled much of its energy and transport infrastructure — which makes Beijing's appetite to keep trading and financing at the margin the single biggest variable in how far Washington's isolation campaign can go. But the numbers below suggest that lever is weaker than the headline exposure implies.

China has built more in Iran than it owns

China's footprint in Iran is financial: Chinese state-backed lenders and contractors have spent more than two decades financing and building Iranian railways, power plants, industrial facilities, and energy assets. AidData counts more than USD 25 bn of Chinese loan commitments to Iranian infrastructure between 2000 and 2023, while Chinese government data put direct investment in Iran at just USD 3.9 bn at end-2023 — a lender and contractor's footprint, not an owner's.

Look at financing and construction instead of equity, and the picture changes fast. China Eximbank signed a roughly USD 1.5 bn loan for the 926 km Tehran-Mashhad railway electrification project in 2017, financing most of an engineering, procurement, and construction (EPC) contract with China National Machinery Import and Export Corporation. Iran provided a sovereign-guarantee and Sinosure backed the financing. The payoff has been thin: AidData says the project had reached just 3% completion by mid-2019, and later reports indicated the Chinese contractor had walked away.

Power infrastructure tells the same story. China Eximbank extended an RMB 3.6 bn (c. USD 563.4 mn) loan for the 913 MW Lamard combined-cycle plant, with Iran's government guaranteeing the debt and state-owned China National Electric Engineering Co. acting as one of the contractors. The same bank separately put up USD 613 mn for the Abadan combined-cycle power project and financed a 448 MW plant in Zanjan.

China pushed furthest into the oil and gas chain — and even there, it's shown it can pull back. Sinopec signed a roughly USD 2 bn agreement to develop the Yadavaran oil field and later a USD 2.1 bn contract to upgrade the Abadan refinery. CNPC entered the first phase of North Azadegan under an agreement valued at around USD 2 bn, and held a 30% stake in the South Pars gas project worth roughly USD 600 mn. CNPC walked away from South Pars in 2019 under US pressure.

Beijing has also kept today's sanctioned oil trade at arm's length from its national champions. Iranian barrels increasingly flow through independent Chinese refiners, while major state refiners keep their distance from sanctioned crude. Washington has aimed part of its pressure at those independents, including sanctioning Hengli Petrochemical's Dalian refinery earlier this year, alleging its Iranian crude purchases generated hundreds of millions of dollars in revenue for Iran's military.

That limited exposure appears deliberate: “The economic relationship between China and Iran is deeply one-sided in that Iran stands to gain more from China than China from Iran,” Amandeep Kaur Ahuja, Geopolitical Risk Consultant & Researcher, tells EnterpriseAM. While Iran directs most of its exports to China, those barrels sit within a much broader mix of energy suppliers for Beijing. China's relatively limited investment in Iran despite years of deeper economic cooperation also signals a reluctance to become too exposed to a market carrying significant geopolitical and physical risks, she adds.

The exposure only cuts one way

The first test is already playing out at the refinery gate. The blockade has choked the supply of Iranian crude reaching Chinese independent refiners, pushing buyers toward alternatives including Russian, Brazilian, Canadian, and Iraqi barrels. Some smaller refiners could be forced to cut runs if Iranian supply stays scarce and replacement barrels stay pricey. Iran relies heavily on Chinese demand — but Chinese refiners have other places to look.

The loss would dent margins more than it would threaten supply.“Iran accounts for 2% of Chinese oil, so if China were to lose Iran as an energy source, it would only impact pricing (because Iranian crude is heavily discounted) and not the overall supply,” Ahuja notes.

Beijing has built in buffers around that exposure, too. “Chinese oil purchases from Iran are primarily conducted through small, privately owned 'teapot' refiners. Financing is processed through non-USD measures. This suggests limited exposure to any interdependencies with Iran while still being able to access discounted crude from Iran, and deliberately framed so,” Ahuja argues.

Infrastructure gets more exposed where the oil trade sits underneath the financing itself. A EUR 2.5 bn agreement signed in 2023 for Phase 2 of Tehran's Imam Khomeini International Airport was structured by Chinese state-owned Hakan Energy as an oil-backed EPC financing agreement, according to AidData. The loan is collateralized against future Iranian oil-export receipts, with a new terminal planned as the centerpiece of the expansion. AidData says the first EUR 500 mn disbursement landed in late 2023, though reports in 2024-2025 raised questions over Hakan Energy's financial condition and continued involvement.

That makes the airport project a useful model for what the blockade could do beyond energy exports. If Iranian oil receipts are collateral for infrastructure finance, choking the barrels doesn't just remove export income — it can undercut the mechanism that's supposed to fund repayment and delivery. But that doesn't mean China eats the first loss. In several of these projects, China's role is lender, insurer, EPC contractor, or equipment supplier rather than long-term owner. Sovereign guarantees, buyer's credits, and oil-backed collateral can push most of the project risk back onto Iran, even when Chinese institutions supply the capital and construction capacity.