How the US-Iran Conflict is Unexpectedly Empowering China's Global Strategy

It must be unique for New York to host the president of a country at war with the US. But alongside Iran’s Masoud Pezeshkian, who is in town for the UN General Assembly, an even more important protagonist in the conflict visited Donald Trump: Chinese leader Xi Jinping. What does Beijing stand to gain from the US-Iran conflict? It benefits from Washington’s distraction. While a third of the US Navy is occupied in a war with no clear end goal, the US squanders munitions and international respect alike. Meanwhile, China is free to expand its strength, deal with its own problems and pose as the responsible, rule-abiding superpower. The current "warm war" suits it just fine.

With a strenuous and expensive US military effort, oil and other commodities are getting out of the Gulf in increasing amounts, although not to pre-conflict levels. That keeps up the domestic political pressure on the White House and means it cannot easily walk away. China has reportedly provided satellite imagery to the Iranians to help them target US bases. It has also supplied shipments with dual-use components that Iran could use to build missiles and drones. As with Russia’s war against Ukraine, China can simultaneously profit, make itself invaluable to a combatant, keep a conflict bubbling along, restrain full-scale escalation and maintain the facade of benevolent neutrality.

In this vein, China does not want energy flows from the Gulf to be almost entirely cut, or for Iran to escalate, or return to large-scale, damaging attacks against regional infrastructure, as in March and April. It is a key investor across the Arab Gulf countries, much more than in Iran. It has large and expensive assets and many of its citizens live in the UAE, Saudi Arabia, Qatar, Oman and Iraq. The Bab Al Mandeb strait at the southern end of the Red Sea, under recent threat from Iran’s allies, the Houthis in Yemen, is a key conduit for Chinese goods to Europe. A Chinese naval base in Djibouti keeps watch over this strait. The GCC and Iraq are cumulatively far more important energy suppliers, customers and economic partners for China than Iran.

Beijing does not need to choose between them. In 2023, it brokered a deal to restore diplomatic relations between Riyadh and Tehran, following the damaging drone and missile attacks on Saudi oil facilities in 2019. Some hoped it would intervene to prevent a repeat. In this year’s war, China might have quietly restrained Iran from trying to unleash more devastation on Saudi energy infrastructure, which would damage its own interests, but it has not emerged as a mediator. Staying out of the morass probably seems wise in Beijing now, though it does impose a hard limit on China’s diplomatic and security weight.

On August 24, US Treasury Secretary Scott Bessent announced an “Economic D-Day” against Iran. But notably, the tougher sanctions have not specifically targeted China, which remains Tehran’s key trading partner and essentially the only remaining customer for its oil. Some previous American measures have hit individual Chinese independent refineries and oil terminals, but none of the major or systemically important ones. China has enacted counter-sanctions, which would target companies complying with US restrictions, presenting them with a tricky choice. Despite facing some long-term economic hurdles, Beijing currently wields significant leverage over the US, leaving it well-positioned while Washington remains bogged down in the Middle East.