Beijing does not support the sanctions imposed on Tehran and continues to buy oil from Iran - over 80 percent of all Iranian exports are destined for China. Can the ayatollahs' regime survive without China?
Shipping through the Strait of Hormuz has practically stopped. However, experts do not believe that the regime in Tehran will risk blocking it permanently in retaliation for US and Israeli attacks.
“Iran conducts about 70 percent of its trade, outside of oil exports, through ports that depend on access to the Strait of Hormuz,” says Iran expert Dalga Katinoglu. He is convinced that imposing a blockade would also harm Tehran itself.
Energy expert Sarah Vakhshuri also highlights Tehran's interests. "From an Iranian perspective, it would be irrational to close the Strait of Hormuz, since important imported goods such as food, medicine and machinery reach the country through it," she said in an interview with „Bloomberg".
Major customers in Asia
After the Israeli and US attacks on Iran, oil and gas prices have risen sharply. It is believed that a barrel could exceed $100 or more if passage through the Strait of Hormuz remains too risky.
According to data from the US Energy Information Administration, about 20 percent of global oil consumption passes through the strait. 80 percent of them are destined for customers in Asia, mainly China, India and Japan.
International media have noted that the closure of the Strait of Hormuz will also lead to problems with kerosene and liquefied gas, in addition to oil. About 30 percent of Europe's kerosene needs are transported through there, as well as a fifth of the world's liquefied gas.
Many countries, including the United States, EU members, Britain, Japan and Canada, have strategic reserves. In the event of a temporary disruption of supplies, they provide the ability to cope within many weeks.
Iran's dependence on China
However, blocking the strait would affect not only the oil and gas exports from the Persian Gulf states to the West, but also Iranian oil supplies to China and India. This would further exacerbate the country's economic crisis.
Since the Islamic Revolution in 1979, Iran has been under Western sanctions, including a ban on oil exports. Between 2006 and 2015, additional sanctions were imposed by the US due to Iran's nuclear program.
After a brief relaxation between 2016 and 2018 on the basis of the JCPOA (Joint Comprehensive Plan of Action) nuclear agreement, US President Trump reimposed strict sanctions after the US withdrew from the agreement.
Beijing only benefits
However, no specific sanctions have been foreseen for countries that do not adhere to the sanctions, respectively, there are still export opportunities. This has led to the fact that almost all of Iran's oil exports go to China - over 80 percent, according to data from the analytical company Kpler.
China is not only the largest recipient of Iranian oil, but also of oil from Venezuela and Russia. Western sanctions imposed on these countries have led to a decrease in prices, from which China only benefits.
It benefits, and Russia increases the quantities exported to China, while Iran has to struggle with falling revenues from oil exports, as the sanctions lead to a significant increase in transportation costs with ships from shadow fleets, due to intermediaries or roundabout routes.
“China is indispensable as a customer for Iranian oil exports, as it buys a large part of the sanctioned crude oil”, explains expert Nikolai Kozanov from Qatar University.
The feud with the US
Because of all this, for Iranian oil exports, China's economic development is more important than possible new UN sanctions. And sanctions against Iran, Russia and Venezuela have allowed China to diversify its imports.
For example, Beijing is distancing itself from suppliers that are closely linked to Washington, such as the Gulf Cooperation Council countries, many of which are tied to US-imposed security and financial mechanisms.
But the sanctions have definitely weakened Iran's economic resilience, as access to new technologies, international financing and investment is severely limited, says expert Nikolay Kozanov. This has a negative impact on production in the long term.
Here is the expert's forecast: “Iran will likely continue to be present in global oil markets, but as a structurally weakened supplier with large price discounts. In a sense, the downward spiral of the Iranian oil sector reflects the economic and political decline of the regime".