China’s strategic pragmatism, Iran’s historic opportunity
By Hamed Vafaei
China Affairs Analyst
The statements by Chinese officials expressing Beijing’s firm opposition to US “unilateral illegal sanctions” and its commitment to defending the rights and interests of Chinese companies should be described as a reiteration of Beijing’s longstanding principled position on the issue, rather than emotional or confrontational declarations. China’s position is rooted in the doctrine of national sovereignty, opposition to “long-arm jurisdiction,” and regulations such as the “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures” (adopted in 2021), which China has recently activated on a significant scale for the first time.
From Beijing’s perspective, US sanctions lack a basis in international law and authorization from the UN Security Council and constitute interference in legitimate bilateral cooperation between countries. However, it should be noted that translating China’s political position into operational support would require a set of measures guided by Beijing’s strategic logic, including managing risks vis-à-vis the United States, maintaining access to cheap energy, and gradually advancing financial and trade independence without sacrificing China’s broader economic interests. In this context, Chinese companies have moved to absorb around 80-90% of Iran’s oil exports and have continued to do so despite US unilateral sanctions.
Multilayered policy against sanctions
Beijing’s support for these key players in the bilateral relationship can be defined and analyzed at several levels. The first is the legal level, which includes issuing a “Blocking Order” that prohibits the enforcement of US sanctions on Chinese soil and exposes companies that comply with them to domestic liability. This instrument has been activated in recent years for refineries linked to Iranian oil and has sent a clear signal to Chinese banks and companies.
The next layer of support involves financial and settlement mechanisms, including the development of the yuan-based Cross-Border Interbank Payment System (CIPS), currency swap lines, state-backed export insurance, and quasi-barter or intermediary mechanisms that keep payments outside the dollar-based system and SWIFT.
The third layer consists of political and economic support, including repeated public diplomacy, facilitating approvals and, where necessary, indirect compensation or insurance coverage.
At the same time, it should be noted that although Beijing has adopted a multilayered policy to counter US sanctions, this support is not absolute. If companies become excessively exposed to external risks or threaten China’s broader interests, such as its relations with Europe or access to technology, they may face restrictions. Nevertheless, while secondary sanctions can raise financing, insurance and logistics costs for both sides and temporarily reduce some of the support flows at the aforementioned levels, experience has shown that China’s network is flexible and can quickly adapt to new circumstances.
Protective shield
It should also be noted that Beijing’s opposition to unilateral US sanctions does not fully shield Iran-China relations from a decline in the level of engagement. However, given Iran’s high level of resilience in the face of the hard and soft pressure exerted by hostile powers, this position can help mitigate the impact of illegal pressure and sustain bilateral ties at a certain acceptable level. Accordingly, although the volume of official, non-oil trade between the two countries has declined at certain periods, energy flows remain the main pillar of the relationship, while strategic cooperation under the 25-year agreement in areas such as energy, infrastructure and technology remains on the agenda.
The key point is that under current circumstances, China’s position helps prevent cooperation from collapsing and partly neutralizes the effects of US sanctions, which Iran considers inhumane, but it cannot prevent Chinese companies from exercising caution or stop some fluctuations in the volume of bilateral trade. In practice, Beijing’s current position can be described more as a “protective shield” than an “impenetrable shield.” On this basis, although bilateral cooperation will not fall to zero in the period ahead, the impact on the quality and transparency of that cooperation will be undeniable.
Parallel tracks
At the same time, amid illegal Western pressure, various parties that regard the current situation as unacceptable have been working to lay the groundwork for new mechanisms independent of the US financial system. In this context, China’s opposition to US unilateral sanctions, particularly through activating blocking mechanisms and expanding yuan-based settlements, as well as practical efforts to establish parallel mechanisms, can be highlighted. CIPS, currency swaps, yuan-based trade, goods-for-goods barter and informal or insured payment networks are the most prominent examples in this regard. However, a notable point in the context of the China-US rivalry is that US pressure is currently accelerating this process at an unprecedented pace, as it has clearly increased Beijing’s strategic vulnerability stemming from its dependence on the dollar. Nevertheless, these mechanisms remain limited in scale globally and cannot quickly become a complete substitute for the dollar-based system or neutralize its influence across the visible and less visible layers of the global economy.
Under current circumstances, such frameworks should be viewed more as “parallel tracks” for specific partners, including Iran, Russia and some countries of the Global South, rather than as an alternative international system. China’s progress in these areas appears to be a gradual and pragmatic process, dependent on greater success in internationalizing the yuan and reducing the dependence of third parties.
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