China is currently the main buyer of Iranian oil and is unlikely to stop buying oil from Iran. Majid Raoufi, an energy expert, tells “Iran Petroleum” that China’s 25-year cooperation pact with Iran would bar the US from reaching its objectives. He said that China would remain a buyer of Iranian oil and petrochemicals.
The following is the full text of the interview he gave to “Iran Petroleum”:
Iran and China have redefined their economic cooperation under a 25-year pact. Beijing has long been a buyer of Iranian oil.How will China’s Iranian oil policy change with Donald Trump in office in the United States? Will China remain a buyer of Iranian oil despite Washington’s plan to bring Iranian oil sales down to zero?
Let’s first review the existing situation. China is the most important market for Iran in crude oil and petrochemical products like methanol and various grades of polyethylene. According to Kepler, Iran supplied 1.5 mb/d of crude oil on average to China in 2024. Iran also exports 90% of its methanol to Chinese markets, which amounts to 8 million tonnes yearly. Iran’s ethylene production capacity stands at 8 mt a year, which is set to grow soon. Based on figures released by Iran’s Trade Promotion Organization (TPO), the share of various grades of polyethylene that Iran exported in 2022 exceeded $4 billion, mainly to China. In the current year, Iran’s revenue from polyethylene has dropped although it tops Iranian non-oil exports. Over recent years, we have used various methods to maintain our ties with China. We have traded oil directly with Chinese “teapot” refineries so that three oil giants, i.e. China National Petroleum Corporation (CNPC), Iranian Offshore Oil Company (IOOC), and Sinopec would be immune to US sanctions as Sinopec and PetroChina, two subsidiaries of CNPC, are listed on top stock markets in the world. These companies are largely active in the world and all their activities are subject to US sanctions. Therefore, they stay clear of any risky activity. But there is room for cooperation with teapots or smaller companies that do not fear US sanctions. For instance, amid Trump’s maximum pressure policy in his first term in office, Zhuhai Zhenrong remained under sanctions, but it did not stop cooperating with Iran. Separately, China has signed a 25-year agreement with Iran and cannot join the US campaign against Iran. That would not benefit its standing and prestige and it has announced it would not join the unilateral US sanctions. Therefore, all routes would remain somewhat open for buying Iranian oil so that Tehran and Beijing could preserve their cooperation and economic ties. Furthermore, Iran has also leased strategic reserves in China, part of which has been consumed. Therefore, Iran’s crude oil exports to China remain acceptable because China has not complied with anti-Iran sanctions.
Apart from the products you just mentioned, what other commodities in the oil sector are we exporting to China?
In addition to crude oil, we export LPG to China to feed its PDH plants for high-value propylene production. Propylene is known as the caviar of petrochemical products. The consulting group FGE has announced that Iran exported 11 million tonnes of LPG to China in 2023, which indicated significant progress for Iran. India and Pakistan are also buyers of Iranian LPG. In the petrochemical sector, as it was already said, the bulk of Iran’s methanol goes to China. Iran is the largest exporter of methanol to China. Of course, after the European Union slapped Russia with its 8th package of sanctions, Russian methanol and propylene were affected and about 2 mt of Russian methanol has been diverted from Europe away to go to China. Russia is exporting methanol to India too, but it mainly sends it to China. That rattles the market of this product. However, we have not faced any certain problems concerning selling Iranian methanol to other countries, particularly China. As far as low-density and high-density polyethylene is concerned, Iran has a good market, generating significant hard currency revenue. Therefore, we have good cooperation with China in crude oil and petrochemical products. Iran is also exporting urea. After India’s position was weakened, the main markets for Iran were Brazil, Turkey, and South Africa. These products constitute the bulk of our exports. It seems that petrochemical exports could not be sanctioned so much and that would clear the way for generating revenue in foreign currency. It is interesting to know that based on statistics released by China, crude oil imports by this country declined for the first time in 2024. Except for the year hit by the COVID-19 pandemic, we witnessed a year-on-year increase in China’s oil imports from other countries. The most important factor that kept the global crude oil market alive was China’s growing demand for crude oil. In 2023, China was importing about 11.28 mb/d of oil, which fell to 11.04 mb/d the following year. This data has influenced assessments and analyses. This trend is likely to continue in 2025.
What was the reason?
There are various reasons for this issue. First, the Chinese have apparently focused on electric vehicles as official data show at least 13 million EVs were manufactured in 2024. Although vehicles burning fossil fuel are still numerous in the world, EV manufacturing has grown significantly in this country. The pace of capacity growth and generation of renewable power in China is stunning. In 2024, it added 277GW to its solar power generation capacity. The next factor is that various sectors of China’s economy, particularly construction, have faced recession, thereby leaving negative impacts on the country’s economic growth. An increase in China’s strategic crude oil reserves is involved.
As far as the China-Europe tariff war is concerned, do you think that we may benefit from this opportunity? Or are world nations complying with US sanctions?
In such relationships, in case tensions cross a threshold, conditions are likely to change.But I don’t think that would apply to Beijing and Washington. I mean that China-US ties are unlikely to become critical although uncertainties abound. For instance, in his New Year message, the Chinese president spoke about the integration of Taiwan into mainland China, which is a sticking point between the US and China. On the other hand, although Trump has said in his election campaign he would impose 60% tariffs on Chinese products, he finally slapped 10% tariffs. That indicates that tensions are not yet significant in their ties. Even after China’s Deep Seek was launched, the US president did not adopt any radical approach, an indication of serious rivalry between the two powers. The US president has recognized the US-China rivalry and has no intention to humiliate China. For his part, Trump also sought to link his country’s bones of contention with Mexico and Canada to China. You must know that the US has ratcheted up pressure on Mexico and Canada due to the fentanyl supply. Trump maintains that fentanyl is smuggled into the US from Canada and Mexico. He had said that drug addiction in the US due to fentanyl trafficking was backed by China. However, import and export data from China and the US indicates that they cannot simply shun their ties. I mean, these two countries cannot ignore their broad economic and trade cooperation to take risks. Data available for the first 11 months of 2024 show that China’s exports to the US exceeded $400 billion while it imported more than $130 billion from the US. When details were released in December, it became clear that Sino-American economic ties were worth $600 billion in 2024.Given that the US has a significant trade deficit with China, China is likely to increase its cooperation with the US and may even consider importing LNG and LPG from the US. Or, given that the US has increased its methanol production, it may import some of its methanol needs from the US.However, the price of methanol produced in the United States is not comparable to the price of this product in West and East Asia. For example, if a ton of methanol in Asia costs around $300, it costs more than $800 in the US.It is worth noting that Trump had stated during his election campaign that the share of US crude oil production during his presidency would exceed 13.5 million barrels, and the famous phrase “drill, baby, drill” was also based on this. Accordingly, China is likely to seek to purchase a portion of US crude oil exports so that the trade balance between the two countries reaches an acceptable level.
Which product is most likely among US exports to China?
LNG is a product that is very likely to be exported from the US to China, and the Chinese are keen to increase the share of natural gas in their mix beyond 10-11%. It is noteworthy that the competition between the two countries in the “new triad” of Chinese exports is very high and significant, which includes solar panels, electric cars, and lithium batteries.These three products were very influential in China’s GDP growth of 5.2% in 2023, contributing $1.6 trillion to Beijing’s economy. According to statistics, China’s GDP growth in 2024 was 5%, with a significant contribution from the new triad.This is the same area where the Americans and the European Union accuse China of producing in excess capacity and have imposed significant tariffs on imports of these three products from China. This issue could be one of the areas of tension between the two countries and pit Beijing and Washington against each other.
Is the US likely to not crack down on Iranian oil sales despite stating clearly its plan to work for driving Iranian oil exports to zero?
That depends on the negotiations between Iran and the US. If these negotiations do not go well, there is a high possibility that the United States will reduce the export of Iranian crude oil to China. In this case, more pressure will be put on Iran and China.They will try to prevent us from exporting our oil by seizing ships, tracking shipments, and imposing sanctions and fines on foreign ports, and they will also slow down the current import of Iranian crude oil to China. Of course, in the case of petrochemicals, it is not very possible to sanction these commodities, but in the case of crude oil, it may be accompanied by difficulties as the conditions for selling Iranian oil to China become more difficult. The dynamism of US-China relations on the one hand, and the process of confrontation between Iran and the US on the other hand are very effective in this matter.
Ameneh Mousavi
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