Is Taiwan The Only Leverage The U.S. Has In Getting China To Toe The Line In Ira

Is Taiwan The Only Leverage The U.S. Has In Getting China To Toe The Line In Ira

Mon, August 31, 2026 at 6:00 PM GMT+3 8 min read

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There is always a winner in any major global oil crisis. In 1973/74, it was Saudi Arabia and its OPEC brothers who shifted the balance of power in the market away from the previous arrangement dominated by the West's 'Seven Sisters' to the oil producers of the Middle East. After the 2014-2016 Oil Price War, it was the U.S. whose earlier nascent shale oil sector resisted the threat to its very existence from Saudi Arabia and OPEC, reorganising into a meaner, leaner, lower-cost oil production machine. The U.S. was the winner again in the short-lived 2020 Oil Price War, and this, along with all the other major crises mentioned, is analysed in full in my latest book on the global oil markets. The latest rupture in the global oil market order that followed the U.S.'s 'Operation Epic Fury' against Iran that began on 28 February has also produced a clear winner. It is neither the U.S., Saudi Arabia, nor the other OPEC states -- it is China. So, how inclined will Beijing be to heed Washington's newly announced sanctions on Iran ahead of the meeting of its President Xi Jinping with U.S. counterpart Donald Trump on 24 September at the White House?

The sanctions in question were announced on 20 August by U.S. Treasury Secretary Scott Bessent, who stated they would be "the ‌toughest sanctions in history" on Iran, under the umbrella of 'Economic D-Day' for the country. The direct sanctions on Iran aim for the complete financial isolation and economic shutdown of the regime by cutting off all domestic and international revenue streams. To this end, the U.S. Treasury blacklisted five core sectors of Iran's economy -- Digital Assets/Crypto, Technology, Gold, Aviation, and Shipping -- making any business operating within them subject to immediate asset freezes. At the same time, all longstanding humanitarian, academic, athletic, and personal remittance exemptions were indefinitely suspended, including a complete ban on non-commercial family money transfers and joint research collaborations. In parallel with this, the state-run Islamic Republic of Iran Shipping Lines (IRISL) and commercial aviation fleets were put under a strict operational embargo, cutting off access to foreign ports, refuelling, and aircraft spare parts. Immediate asset freezes were also levied against procurement networks, cyber warfare units, and business syndicates tied to the Islamic Revolutionary Guard Corps (IRGC).

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In tandem with this, the U.S. Treasury, along with sister organisations, will fully utilise secondary sanctions to force foreign governments and companies to choose between trading with Iran or trading with the U.S., under the umbrella of 'Operation Economic Outcast'. This aims to target the complete financial isolation of Tehran by cutting off its remaining economic lifelines. To that end, the U.S. Treasury has already blacklisted nearly 60 entities, individuals, and vessels, focusing heavily on third-party facilitators in Hong Kong, mainland China, the UAE, Singapore, and Europe. The most potent weapon here for the U.S., as it has been for years, remains a ban on transgressors using the U.S. Dollar System, with any foreign bank that processes payments for Iranian oil or masks the origin of Iranian funds to be cut off from the U.S. financial system and banned from clearing transactions in U.S. dollars. Third-party companies (such as front companies and currency exchange houses in Dubai, Hong Kong, and Singapore) that facilitate Iranian trade will be added to the Office of Foreign Assets Control blacklist. Meanwhile, international maritime firms, insurers, ship managers, and port operators face severe financial penalties and asset freezes if they service or insure any blacklisted Iranian oil tankers. Ultimately, any and every foreign company that violates the rules is banned from exporting goods to the U.S. or partnering with American businesses.

That said, China has repeatedly proven itself eminently capable of enduring such sanctions on Iran over a sustained period before, as thoroughly detailed in my latest book on the new global oil market order. This involves a mix of old, tried-and-trusted methods and brand-new tactical evolutions. In the former category lies the use of non-systemic commercial banks -- historically epitomised by the Bank of Kunlun -- that have zero exposure to Western assets or the U.S. dollar. These serve solely to clear oil payments in local currency. Another is the use of small, independent, regional refiners ('teapots'), which also have zero international operations. Finally, there are the mechanisms inherent in the full terms of the 'Iran-China 25-Year Comprehensive Cooperation Agreement', as first revealed anywhere in the world in my 3 September 2019 article and analysed in full in my latest book on the new global oil market order, which includes swap arrangements involving Iranian oil for Chinese infrastructure, industrial goods, and technology agreements. Perhaps the most effective among the newer measures is the scaling up of China's Cross-Border Interbank Payment System. It means the system now runs on completely independent, Chinese-hosted secure messaging infrastructure that acts as a true alternative to SWIFT, effectively making transactions invisible to the U.S. Treasury. In parallel with this, China and Iran are utilising state-sanctioned digital tokens and decentralised finance liquidity pools to mask oil payments at an unprecedented rate.

China also has broader levers available to it to be able to regard the U.S.'s latest sanctions initiative with a modicum of interest and perhaps amusement only, rather than alarm. For a start, it controls around 85% of global rare earth processing and over 98% of heavy rare earths. Without Chinese rare earths, the U.S. cannot build its advanced military hardware, run high-tech manufacturing, or execute its green energy transition. After Trump launched his sweeping 'Liberation Day' tariffs on 2 April -- including on China -- Beijing had no hesitation in retaliating with a bureaucratic chokehold that forced exporters to obtain strict state licences, which Beijing then systematically delayed or denied to halt shipments of critical heavy elements to the U.S. This is one key reason that Washington has hesitated to fully sever China's Tier-1 banks from the U.S. dollar system. Another is that China has emerged as the key 'swing player' in the global oil market since the U.S. launched 'Operation Epic Fury' just over six months ago. Rather than effecting major oil price changes through the supply side -- as Saudi Arabia, OPEC, and the U.S. have done in the past -- China has done the same by huge reductions in its demand. More specifically, China cut its crude oil purchases by up to 5.8 million barrels per day (bpd) -- or about 50% -- from a 2025 baseline of near-12 million bpd down to approximately 7 million bpd by June 2026. This on its own shaved an estimated US$30+ per barrel off Brent crude prices, according to market analysis. It did this primarily by drawing down on its estimated 1.5 billion-barrel stored crude reserves and banning refined fuel exports, thereby reducing its daily take from the global oil supply. Although such measures did not keep the oil price in the 'Trump Oil Price Range', as examined in my latest book on the global oil markets, it did reduce it to levels that mitigated the enormous economic pain for several Western countries -- including the U.S. -- that would have resulted otherwise. Its stance on maintaining such activities can change just as fast as it began.

As the biggest buyer of Iranian oil -- over 80% of the Islamic Republic's shipped oil, at the huge discounts mandated in the landmark 25-Year Deal -- China made clear through its foreign ministry spokesman, Lin Jian, last week that it will protect its interests against what it calls "illegal unilateral sanctions". He added that it will take "all necessary measures" to safeguard its rights, and that: "Cooperation between China and Iran has always been conducted within the framework of international law and should not be interfered with or disrupted." In terms of how the U.S. might target China for doing business with Iran, Treasury Secretary Bessent said: "We are confident that everyone wants the Strait (of Hormuz) reopened, and for energy prices to come back down, […] Keep in mind that the Chinese get 50% (of their) energy from inside the Gulf, so it would do them a big service to get with the program." Given that China has continued to supply Iran with technology and equipment that have been used in its ongoing war with the U.S. regardless of any fear over U.S. censure, it is difficult to see precisely what pressure may be brought to bear on Beijing in Trump's meeting with Xi in September. Perhaps the answer lies in some sort of understanding to be reached on U.S. actions in Iran against China's interest in Taiwan. After all, according to former CIA Director William Burns, Xi has ordered his military to be ready to launch a successful invasion of Taiwan by 2027.

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