COLUMN-China trade spat undermines Trump’s ‘max pressure’ Iran campaign: Bousso

By Ron Bousso

LONDON, April 10 - The deepening trade war between the United States and China could significantly undermine President Donald Trump's "maximum pressure" campaign against Iran, which earns tens of billions of dollars in revenue annually from oil sales to Beijing.

Since taking office in January, Trump has ratcheted up pressure on Iran in a bid to stop it from obtaining a nuclear weapon, an ambition it denies harbouring. Washington has sought to drive Tehran’s oil exports down to zero, cutting off a major source of revenue for the Islamic Republic.

That’s a tall order. The United States and the European Union have for years targeted Iran’s oil exports with limited success. The OPEC member’s oil production rose to 4.6 million barrels per day in 2023, the highest since 2018, according to the Energy Institute’s Statistical Review of World Energy.

But Trump is clearly willing to up the ante. He recently threatened to bomb Iran and impose secondary tariffs on buyers of its oil if Tehran does not agree to a nuclear deal.

The U.S. administration also issued a string of sanctions against Chinese entities involved in crude trading and, for the first time, targeted Chinese "teapot" refineries – small, independent plants – that process Iranian crude.

Beijing accounted for at least 77% of Iran’s roughly 1.6 million bpd of exported crude in 2024, according to analytics firm Kpler. The value of Iran's crude sales to China is not officially disclosed, but a Reuters calculation puts the trade at nearly $29 billion last year, assuming a 20% discount to the Brent crude prices to include costs of logistics.

Washington thus clearly understands that any effort to choke off Iran's oil exports will have to involve persuading, or coercing, China to halt the oil trade.

But doing this will be much more challenging now, given the rapid deterioration in relations between the two trading partners. They have exchanged tit-for-tat tariffs over the past few weeks, culminating in Trump’s announcement on Wednesday that he would raise tariffs on Beijing to an eye-popping 125%, dwarfing China’s newly announced 84% tariff on U.S. goods.

MAXIMUM PRESSURE?

So what could Trump try to do?

While China officially does not import any crude oil from Iran, its independent teapot refineries have for years circumvented international sanctions on Iranian oil exports and shipping using an opaque web of shell companies and tankers.

So, in theory, more of these small refineries could be targeted. But as the recent U.S. sanctions on Shandong Shouguang Luqing Petrochemical Co., Ltd have shown, such actions are likely to have a limited impact since many of these China-based plants’ operations are domestic.

Secondary sanctions on Iranian crude are also unlikely to faze China, considering the extraordinarily high tariff barriers Trump has already erected. Once a country is facing tariffs exceeding 100%, the threat of additional penalties has little bite.

If Washington is incapable of limiting Iran's oil revenue by a meaningful amount, then it is fair to assume that the key lever in Trump’s "maximum pressure" campaign won’t be financial.

That doesn’t necessarily mean Trump will pursue a military conflict with the Islamic Republic, though the administration has taken several actions – including moving six B-2 heavy bombers to the Indian Ocean – which appear designed to signal that the threat is real.

But the Republican president this week also made a surprise announcement that the United States and Iran were poised to begin direct talks. Iran’s foreign minister later said the discussions in Oman would be indirect.

Either way, tensions between Washington and Tehran continue to rise, and this could ultimately give Chinese President Xi Jinping leverage in his own battle with Trump.

He could use Iran’s dependence on China as a bargaining chip in any future negotiations with the U.S. about defusing their trade tussle, as it is unlikely that Trump would want to pursue a trade war and an actual war simultaneously.

** The opinions expressed here are those of the author, a columnist for Reuters. **

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