Iran sanctions add fresh challenge ahead of next month’s US-China summit

China swiftly opposed the United States' new sanctions on Iran, creating a predicament for Washington as Beijing, a major importer of Iranian oil, might face challenges in maintaining US-China stability. The economic sanctions against Iran are increasingly becoming a potentially hazardous trigger for US-China relations. On Tuesday, Beijing firmly objected to Washington's efforts to sever Iran's economic ties as outlined by US Treasury Secretary Scott Bessent earlier in the day.

Chinese Foreign Ministry spokesperson Lin Jian affirmed China's strong opposition to unilateral sanctions lacking international law foundation or UN Security Council authorization, stating that China would take all necessary measures to protect its rights and interests.

A day prior to the US announcing its "Operation Economic Outcast" targeting Iran, the Chinese Foreign Ministry disclosed that Vice Foreign Minister Miao Deyu met with Iranian counterpart Kazem Gharibabadi in Beijing on August 17. Discussions focused on Middle East tensions, suggesting China's commitment to its relationship with Iran.

The US imposed sanctions on 60 individuals and entities involved in business with Iran, but notably exempted Chinese financial institutions, aiming to pressure China into cooperation without provoking a wider conflict. However, China's current stance indicates securing Beijing's cooperation will be challenging.

The US must exert pressure on China through financial institution sanctions, but this could prove costly. The two nations avoided a full-scale trade war in 2025 by reaching a truce before tensions escalated further, but the economic conflict could resurface if Washington intensifies sanctions on Beijing. China's willingness to use critical minerals like rare earths as leverage poses a particular concern for the US.

The US economic campaign against Iran could test the "constructive relationship of strategic stability" established by former US President Donald Trump and Chinese President Xi Jinping in their first real crisis. The US must ensure its measures remain limited and do not challenge China's core interests to maintain a manageable level of tensions leading up to the upcoming summit between Trump and Xi next month.