China’s Iran conundrum: Energy shocks, US pressure, and the end of cautious diplomacy

Despite the geopolitical turbulence of Donald Trump’s second term in office, China has weathered the storm remarkably well.

• From adroitly facing down US tariffs with its own proportional response to mending fences with spurned American partners, Beijing has navigated Trump’s erratic tenure with aplomb.

But as the Iran war enters its seventh week, Chinese leaders face a genuine geopolitical conundrum – and unfamiliar diplomatic waters.

Shy guy: For all its global influence, China is ever the cautious diplomat when it comes to crises far from its borders.

• After Russia invaded Ukraine, Beijing refused to be pressured into formally supporting either side, despite its close relationship with Moscow.
• Likewise, China was almost a non-entity when it came to brokering a ceasefire between Israel and Gaza.

Beijing’s logic is simple: It doesn’t benefit China to wade into complicated foreign entanglements when it doesn’t absolutely have to.

• There’s also no sense in China putting a target on its back by being seen as the major sponsor of one or more of the involved parties.

But this time could be different:

• While China maintains large energy reserves, every day that the Strait of Hormuz remains blocked eats into that all-important buffer – not to mention hitting Chinese access to a swathe of other critical industrial inputs.
• Meanwhile, energy price shocks are squeezing corporate profits and undermining consumer sentiment at home, as well as foreign demand for Chinese exports on which the country’s economy relies.

Then there’s the growing risks to China’s relations with the US: The longer the conflict drags on, the higher the likelihood that the Trump administration will lash out at China, Iran’s perceived benefactor.

• The US has threatened sanctions against Chinese entities involved with the purchase of Iranian oil, and the possibility of the US Navy interdicting a Chinese ship is a diplomatic crisis waiting to happen.

Beijing’s ties with Tehran are already coming under intense scrutiny: 

• Days ago, US intelligence claimed that China was preparing a shipment of air defense systems to Iran, though China has denied this (CNN).
• The claims prompted Trump to write a letter to Xi Jinping warning him against supplying Iran with weapons.
• Leaked Iranian documents suggest that Iran purchased a Chinese spy satellite in 2024, which it subsequently used to target US military bases in the Middle East (FT).

Stating the obvious: A breakdown in China-US ties over Iran would effectively undo months of painstaking effort aimed at putting the relationship on a more even keel and return the two countries to a dangerous state of rivalry.

For now, however, there are signs that The Donald is interested in keeping things civil.

• In a Truth Social post, he said he would “permanently” open the Strait of Hormuz as a favor to China in exchange for Beijing’s supposed pledge not to send weapons to Iran.
• He further said that the US and China were “working together smartly, and very well! Doesn’t that beat fighting???”

However, it’s anybody’s guess as to whether or not Trump will be in such a good mood if the conflict is still unresolved by the time he travels to China on May 14-15.

• The outcome of talks between Trump and Xi during that visit will offer a clearer picture of whether the Iran war is set to become an intractable drag on bilateral relations or just a blip on the radar.

Putting it all together: The Iran war is a global geopolitical crisis with a direct, immediate impact on Beijing’s core interests – across a range of different channels.

• If China sticks to its usual conservative playbook, it could forfeit its ability to influence the outcome and allow the risks to proliferate.

So far, Beijing’s efforts regarding Iran have focused on quiet backchanneling to try to resolve the conflict:

• China was reportedly central to persuading Iran to accept the two-week ceasefire with the US on April 8 and worked closely with Pakistan throughout the negotiation process (though it credited Islamabad with the breakthrough). 
• Chinese leaders have been furiously working the phones to regional capitals to discuss the crisis, and Beijing has dispatched a special envoy to the Middle East for on-the-ground engagement.
• Top diplomat Wang Yi also leaned directly on his Iranian counterpart Abbas Araghchi to “restore normal navigation in the Strait [of Hormuz].”

The big problem: Despite its low-key approach, Beijing has already stuck its neck out – raising expectations that it is key to resolving the crisis.

• Both Trump and Iranian officials acknowledged Beijing’s role in brokering the recent ceasefire.

That cuts both ways: If Chinese diplomats succeed in pulling Iran back to the table, Beijing will collect a credibility dividend as a global crisis manager.

• But if it tries and fails – or is seen as not trying hard enough – the blowback could be significant.

The big question: Given all that’s at stake, what will China do if its behind-the-scenes approach doesn’t work?

• If Beijing can’t persuade Tehran to compromise on key demands in future talks with the US, it might be forced to adopt more assertive methods.
• What that might look like is anyone’s guess, but it could be anything from more publicly distancing itself from Tehran to threatening to wield its economic and financial leverage over the Iranian economy to force Iranian officials to play ball.

The bigger picture: In the years ahead, China will face greater pressure to come off the sidelines and play a role in resolving global crises commensurate with its immense economic and political influence.

• The Iran conflict could serve as a trial run for a new, more muscular form of Chinese diplomacy, but only if Beijing rises to the occasion.

Joe Mazur, Head of Geopolitical Research, Trivium China