Trump Intensifies China Pressure Over Iran Support
Donald Trump’s second presidential term exhibits a notable shift in strategy compared to his initial tenure, primarily concerning his approach to rival nations. While the overarching aim – establishing the United States as the world’s leading superpower – remains consistent, the methods employed in managing these relationships have become markedly more assertive. Nowhere is this evolution more evident than in the administration’s dealings with China, particularly in its efforts to curb Beijing’s support for Iran and Russia. The imposition of additional sanctions targeting key Chinese mechanisms used to finance these two countries is a central element of this new approach.
U.S. Intensified Approach to China
The initial Trump administration was frequently criticized, even by those closest to him, for a perceived softness towards China. A particularly pointed accusation came from John Bolton, his former National Security Advisor, who asserted that Trump “gave up security considerations for trade.” This criticism centered on the near-complete reversal of U.S. sanctions imposed on Chinese telecommunications company ZTE for repeated violations of sanctions against Iran and North Korea. Following a private phone call with President Xi – in which Xi reportedly told Trump he would “owe [Trump] a favor” if he reduced the sanctions against ZTE – Trump swiftly acted to lift them. Shortly thereafter, Trump tweeted, “President Xi of China and I are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
Shifting from Naivety to Assertiveness
As sources close to the first administration revealed to OilPrice.com at the time and subsequently, this initial approach was largely driven by the administration’s relative political naivety rather than any strategic calculation. “Trump was used to dealing with rivals in a certain way based on his real estate background and elements of that carried into the first presidency,” stated one Washington-based source. “But he [Trump] saw that this didn’t achieve the objectives he wanted, so they have changed this time around,” he added. “So now, he is still willing to play pally when he thinks it is beneficial to getting what he wants, but the flipside is a no-[BS] response,” he underlined. This became strikingly evident recently with the U.S.’s military support for wide-ranging Israeli strikes against Iran’s nuclear program targets after a 60-day deadline to Iran to reach a new nuclear agreement.
China’s Role and the Strategic Shift
Prior to this, President-Elect Trump was instrumental in pushing for the utilization of critical operational elements that led to the removal of Bashar al-Assad from Syria in December – a regime that had been a persistent source of irritation for him in his first term. He accomplished this despite his apparent “friendly relationship” with Russian President Vladimir Putin, with a key objective being to “put Moscow’s, Beijing’s and Tehran’s leadership on notice that Washington can easily redraw and restructure borders and regimes in not just the Middle East but also in Eastern Europe and elsewhere, if it wants to,” a senior source connected to the European Union’s security complex exclusively told OilPrice.com at the time.
A More Confrontational Strategy
This current strategy represents a significant departure from the first term. Now, Trump is taking a markedly tougher approach to China’s Xi Jinping. Not only was Beijing subject to the highest tariffs anywhere in the first round of U.S. tariffs in April, but following negotiations aimed at reducing tariffs on both sides, Trump reimposed them after China’s 9 October tightening of export controls on rare earth metals. Beijing additionally blocked exports of rare earths for foreign military use, directly impacting U.S. defense supply chains. The timing of these events appears as a geopolitical test for Trump personally, occurring ahead of the scheduled Trump-Xi summit in South Korea, slated for 30 October, where the two leaders are expected to meet.
Masking Trade with Sanctions
The U.S. Treasury Department, on 1 November, sanctioned China’s Rizhao Shihua Crude Oil Terminal at Lanshan port and Shandong Jincheng Petrochemical Group (an independent refinery in Shandong province), entities that have handled millions of barrels of Iranian petroleum. Treasury Secretary Scott Bessent accurately highlighted in a statement that: “The Treasury Department is degrading Iran’s cash flow by dismantling key elements of Iran’s energy export machine.” He added that the sanctions were aimed at entities that “collectively enabled the export of billions of dollars’ worth of petroleum and petroleum products, providing critical revenue to the Iranian regime.”
Unmasking China’s Financial Support
China has been the key financial enabler of the current regime in Iran for years, effectively prolonging the war in Ukraine. This support is manifest in the massively ongoing exports of Iranian oil to China, facilitated by the “Iran-China 25-Year Comprehensive Cooperation Agreement,” first revealed anywhere in the world in my 3 September 2019 article on the subject and analyzed in full in my latest book on the new global oil market order. Specifically, China is allowed first refusal on most of the oil, gas, and petrochemicals projects that emerged in Iran during the agreement’s duration. Furthermore, the per-barrel payments to China – defined as the higher of either the mean average of the 18-month spot price for crude oil produced or the past six months’ mean average price – significantly favors Beijing. The deal’s terms also include a 10% discount to China on the value of the oil it recovers – although with bonuses applied this totaled 30%. This discount applies to the lowest mean one-year average market price at the key gas pricing hubs for the gas that Chinese firms captured as well.
The Underreported Trade
The exact size of Beijing’s ongoing imports of oil from Iran is currently unknown for three key reasons. First, Iranian oil that does not officially appear in China’s General Administration of Customs (GAC) data is not entered into the country’s customs data, thus it does not feature in the country’s official figures. Therefore, millions of barrels of oil each month are imported to China in this way and are then simply moved to refineries or stored, effectively as part of China’s Strategic Petroleum Reserve, without ever having been recorded by the GAC. Second, the oil that arrives in China may well have been registered as being from Iraq in the first place, as it shares many key oil reservoirs with Iran, and it is largely impossible to tell from which side the oil has been extracted. Iran’s former Petroleum Minister, Bijan Zanganeh, publicly highlighted this in 2020, stating: “What we export is not under Iran’s name — the documents are changed over and over, as well as [the] specifications.” And third, as an extra fail-safe against tracking, Iranian oil destined for China is often transferred from ship to ship at sea – in Malaysian and Indonesian waters – effectively outside Chinese territorial waters. As Iran’s former Foreign Minister, Mohammad Zarif, stated in December 2018 at the Doha Forum: “If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions.”
Increased Pressure
This latest U.S. escalation against China follows a gradual ramping up of pressure by Washington on Beijing for its ongoing support of Iran and Russia. Just before the latest sanctions, the U.S. State Department had imposed further prohibitions on 20 entities it believed were engaged in trading Iranian oil and petrochemical products, including China’s Zhoushan Jinrun Petroleum Transfer Co., an oil terminal in the greater Zhoushan port area, Guangsha Zhoushan, and Dongying Port.
Conclusion
The shift in Trump’s approach, characterized by increased scrutiny and direct action against China’s dealings with Iran and Russia, signals a determination to enforce U.S. interests and reshape the global geopolitical landscape. This new strategy underscores a move away from a more accommodating stance toward a more assertive and confrontational approach, particularly in challenging what Washington perceives as Beijing’s support for unstable regimes.
