China and Iran: It’s business as usual

Hi readers,

Less than six months after the Israeli and US airstrikes inside Iranian territory, Beijing’s ties with Tehran have not wavered despite Iran’s nuclear and economic setbacks from the war. 

This week has seen the two countries expand their energy, diplomatic and military ties, driven by powerful structural interests even as they adjust to sanctions pressure and shifting regional dynamics. 

Recent moves on oil trade, symbolic military drills and coordinated UN diplomacy show more continuity than change in how Beijing and Tehran manage their partnership.

Let’s explore below! 

Thanks for reading,

Joyce (sign up here)

Leading this week

➡️ Oil flows continue: Despite a new wave of US sanctions targeting the dark fleet of Iranian oil and its smugglers' network, China’s independent teapot refiners continue to anchor Iran’s energy exports. According to Bloomberg, a new Chinese import quota round this week has allowed roughly 20 of these refiners to lift about 7 million to 8 million tons of crude, prompting a fresh wave of withdrawals of Iranian oil from Chinese ports and offshore storage despite generally weak domestic demand. 

At the same time, Iranian crude floating at sea has risen to more than 54 million barrels this week, the highest level in around two and a half years and a sign that export flows are still robust to China. The buildup suggests that both sides are fine-tuning a longstanding play to go around sanctions. Steep discounts show how Tehran compensates for its limited customer base while giving Chinese refiners a price incentive to maintain the relationship.

Intensifying US sanctions have not fundamentally altered this logic, even if they complicate it. Washington has targeted Chinese teapot refineries, terminals and shipping companies for facilitating Iranian crude, in some cases naming specific Shandong plants and shadow-fleet tankers tied to billions of dollars in trade. These measures are designed to raise the cost of doing business with Iran and disrupt the maritime networks that move its oil.

But the underlying China-Iran energy nexus endures. For Beijing, discounted crude diversifies supply and reduces import costs; for Tehran, China remains an indispensable outlet and financial lifeline.

➡️ Symbolic security cooperation: On the security front and also this week, China and Iran continue to showcase their alignment through multilateral frameworks such as the Shanghai Cooperation Organization. The SCO’s five-day Sahand 2025 counterterrorism drill, which began Monday at a base in Iran’s East Azerbaijan province, is the first exercise of its kind conducted on Iranian soil. Officially, it brings together SCO members and observers — from China and Russia to India, Pakistan and Central Asian states — under the organization’s Regional Anti‑Terrorist Structure to practice responses to terrorism, separatism and extremism.

Analysts, however, told Radio Free Europe that the exercise is modest in scale and limited in substance, with light participation and little sign of significant hardware deployments or real joint operational capability. 

In that sense, it fits into a longer trajectory of China using carefully calibrated defense engagement with Iran to send political messages at low cost: signaling support for Tehran’s regional standing, reassuring other Eurasian partners and reminding Western capitals that Iran is not isolated — all without committing to any binding defense guarantees.

Iranian President Masoud Pezeshkian (4th R) attends a meeting with Chinese President Xi Jinping (4th L) at the Great Hall of the People in Beijing on Sept. 2, 2025. (PARKER SONG/AFP via Getty Images)

➡️ Coordinated diplomacy on the nuclear file: Diplomatically, Beijing’s coordination with Tehran and Moscow over the UN’s Iran file reflects continuity as well. The three jointly informed the UN secretary‑general and Security Council in a letter on Tuesday that all provisions of Resolution 2231 should be respected, even if the United States quit the JCPOA in 2018 and later tried, along with European governments, to revive sanctions through the snapback process.

In the letter, the three reject the legality of recent European moves to reimpose UN measures and argue that persistent Western allegations about Iran’s nuclear activity lack standing in light of IAEA inspections. But the agency rebuked Iran last month for not granting access to all nuclear facilities and asked Tehran to provide information on its enriched uranium stockpiles. In response, Iran announced that it would cease allowing the UN watchdog to conduct any inspections in the country.  

For Iran, the Russian and Chinese diplomatic backing reinforces long‑running narratives about Western “double standards”; for China, it is a familiar balancing act that preserves economic and political ties with Tehran while keeping the nuclear issue within a multilateral, legalistic frame.

Joyce's take: Taken together, discounted oil flows, calibrated security symbolism and coordinated UN messaging all point toward Chinese commitment to preserving Beijing’s interests with Tehran. China is not upgrading the partnership, but it is also not scaling it back in response to sanctions or regional shifts. Instead, it is doing what it has done for years: quietly adjusting tactics while keeping the fundamentals of the relationship intact.

Photo of the week

A ship loaded with oil docks at a pier with the help of a tugboat at the port of Qingdao, in eastern China's Shandong province on June 12, 2025. (Photo by AFP) / China OUT (Photo by STR/AFP via Getty Images)

Deals and visits ✈️

• UAE's Masdar City Free Zone opens first China office
• Egyptian, Chinese, Emirati companies sign defense manufacturing memorandum
• China Eastern Airlines launches direct flight between Muscat and Beijing
• Algeria’s land forces commander meets with Chinese ambassador
• China increases imports of Iranian oil
• Egypt, China sign memorandum to jointly produce military drones
• China to reopen its embassy in Damascus in early 2026
• Moroccan, Chinese ministers meet in Marrakech
• Chinese firm wins contract for UAE firm Masdar’s Oman solar plant
• Chinese film week opens in Cairo

Thanks to Al-Monitor's Rosaleen Carroll for preparing this section.

What we are reading​​​

• How Israel's embassy lost China: The Diplomat
• Beyond Boeing and Airbus: China’s C919 courts Gulf: Al-Monitor
• What Trump gets wrong about China: Foreign Affairs
• Why Xinjiang casts a long shadow over China and Syria’s efforts to build better relations: SCMP