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For China, the world's largest crude importer, Iranian oil has become a strategic asset. It provides a cheap and reliable supply for its independent“teapot” refineries in Shandong province, which thrive on discounted crude and account for roughly a quarter of China's refining capacity.

If disguised shipments are counted, Iran is now China's third-largest source of crude imports, providing a significant share of its total supply and creating a critical vulnerability.

Table 2: China's crude oil imports by source country (2023–2025)

Country	2023 Imports (mbpd)	2024 Imports (mbpd)	2025 Imports (mbpd) (est.)	Share of Imports (2025 est.)	Change (2024 vs 2023)
Russia	~2.14	2.17	~2.20	~20.0%	+1%
Saudi Arabia	~1.72	1.57	~1.60	~14.5%	-9%
Iran*	~1.10	1.41	~1.30	~11.8%	+28%
Iraq	~1.2	~1.3	~1.35	~12.2%	+8%
Brazil	0.75	0.88	~0.90	~8.2%	+17%
Others	Remaining 35%	Remaining 34%	Remaining ~33.3%	Mixed

Sources: Chinese customs data compiled by Reuters and EIA. Iranian volumes are estimates., mostly relabeled as Malaysian or Omani crude. Snapback shock scenario

A sudden halt to this trade – whether from tighter US enforcement or a UN“snapback” of sanctions – would trigger an immediate supply shock. The removal of Iran's current export volume, estimated at ~1.3 mbpd in 2025, would create a significant hole in China's import slate.

The macroeconomic consequences would be swift and painful. The most direct impact would be the loss of the steep discount. Based on the reduced 2025 export levels, an average discount of $10-$14 per barrel translates to a direct increase of $13 to $18 million per day in China's import costs. Annually, this amounts to a substantial $4.7 to $6.6 billion hit to its energy bill. This isn't just a rounding error; it's a direct tax on the Chinese economy.

This financial blow would create a powerful inflationary shock. Higher energy and feedstock costs would ripple through the economy, squeezing margins for petrochemical producers, plastics manufacturers and heavy industry.

This would come at a time when Beijing is already struggling to combat deflationary pressures and revive sluggish post-pandemic growth. A spike in energy costs would act as a direct tax on both industrial production and consumer spending, potentially shaving 0.3% to 0.5% off China's annual GDP growth target in the first year alone.

For the independent“teapot” refineries built around this cheap crude, the shock could be existential, risking closures and regional fuel supply disruptions.

Limited options

China retains certain tools to soften the blow:

• Tap Other Exporters: Increase imports from OPEC+ producers with spare capacity, such as Saudi Arabia and Iraq, or redirect more Russian supply.
• Use Strategic Reserves: Beijing's stockpile of over 900 million barrels provides months of import cover.
• Diversify Energy: Accelerate the transition to renewables, natural gas and electric vehicles to curb oil dependence.

For Tehran, losing the Chinese market would be devastating. China accounts for nearly all its oil exports. Without this market, Iran would face a fiscal crisis, currency pressure and deeper reliance on illicit networks.

The regime could be forced into steeper discounts to smugglers or desperate barter trades, further eroding state revenues at a time of economic decline. Strategically, Iran would lose influence, as its partnership with Beijing is built primarily on oil.

Weaponized interdependence

A full cutoff of Tehran's oil flows would recalibrate the US-China-Iran triangle. For Beijing, it would underline the reach of US sanctions power, but also accelerate efforts to de-dollarize and diversify. For Tehran, it would mean a crippling loss of its last major customer.