Iranian Oil in China's Energy Basket: An Economic Approach Beyond Politics

 Iranian Oil in China's Energy Basket

 Iranian Oil in China's Energy Basket: An Economic Approach Beyond Politics

China is the main buyer of Iranian oil, accounting for about 13.6% of the world's largest crude oil importer's purchases in 2025.

This makes Beijing the most vulnerable to any supply disruptions resulting from conflict in the Middle East, according to Reuters. Beijing is also the largest buyer of oil from Venezuela and one of the largest importers of Russian oil. It has used purchases from the three countries, which face various Western sanctions, to save billions of dollars on its import costs in recent years.

How much oil does China buy from Iran?

China buys nearly 90% of Iranian oil shipped in, which has few buyers due to US sanctions aimed at cutting off funding for Tehran's nuclear program. Kpler data indicates that in the first six months of this year, China's purchases of Iranian oil averaged 1.38 million barrels per day. Kpler also notes that last year, China's average purchases from Iran averaged 1.48 million barrels per day, representing about 14.6% of China's imports.

Who are the main Chinese buyers of Iranian crude?

The main buyers of Iranian crude are independent Chinese refiners, mostly based in Shandong Province, attracted by its lower prices compared to non-sanctioned oil.

These companies provide about a quarter of China's refining capacity and operate on thin, sometimes negative, profit margins. They have recently been under pressure due to sluggish domestic demand for refined products. Traders and experts say that major Chinese state-owned oil companies have refrained from purchasing Iranian oil since 2018-2019.

How Cheap Is Iranian Oil?

Reuters reported on Friday, June 20, that Iranian light crude was trading at a discount of $3.30 to $3.50 a barrel to ICE Brent for July delivery. This compares to discounts of around $2.50 for June, which three traders said were as high as $2.50, as independent Chinese refiners slowed purchases and sellers looked to draw down inventories. Compared to unsanctioned oil from the Middle East, traders say Iranian oil is currently selling at a discount of around $7 to $8 a barrel.

Are US sanctions having an impact?

Washington reimposed sanctions on Tehran in 2018, and the administration of US President Donald Trump has imposed several new rounds of sanctions on Iranian oil trade since returning to office in January.

Reuters reported that Trump's sanctions included three independent Chinese refiners, undermining purchases from several medium-sized independent companies that fear being placed on the sanctions list. One trader estimated that non-sanctioned oil replaced about 100,000 barrels per day of Iranian oil to China this year.

What is Beijing's position on the Iranian oil trade?

Beijing rejects unilateral sanctions and defends its trade with Iran as legitimate. Traders typically classify Iranian oil imported by China as coming from other countries, such as Malaysia, a major transshipment hub. Chinese customs data has not shown any oil shipped from Iran since July 2022.