China and Iran sanctions: what US moves mean for Beijing, and its retaliation options

The United States has announced new sanctions targeting entities involved in Iran's illicit nuclear and missile programs, as well as those involved in generating revenue from oil sales. These measures aim to cripple Iran's economy and reduce its support for terrorism. China, Iran's primary trade partner, has pushed back against the sanctions, warning that they are "illegal unilateral sanctions" and that no one is above the reach of US sanctions.

The new measures focus on smaller Chinese entities, individuals, and vessels, rather than major banks. China purchases up to 90% of Iran's oil exports, primarily through independent teapot refineries that evade US sanctions. China maintains a transactional relationship with Iran, balancing its ties to avoid alienating Iran's regional rivals, particularly Saudi Arabia and the UAE.

The ongoing US sanctions are expected to be discussed at the upcoming Shanghai Cooperation Organization summit in Kyrgyzstan, where Iran's president is set to attend. China has consistently called for a diplomatic solution to the Iran conflict and has not shown interest in severing economic ties with Iran to assist the US in maintaining its regional presence.

Despite US military setbacks in the region, Beijing is unlikely to take drastic action against Iran to prevent a highly anticipated US-China summit in September.