Supply Chains And China's Hormuz Imperative

(MENAFN- Asia Times) In the evolving landscape of 21st-century energy security, global attention often gravitates toward the maritime disputes of East Asia. However, a structural analysis of global energy flows indicates that the true center of gravity for Asian economic stability remains thousands of miles to the west.

As regional alliances are reshaped by the geopolitical dynamics of 2026, a fundamental reality persists: The continuity of China's industrial growth is inextricably linked to the stability and accessibility of the Persian Gulf.

The“Hormuz Imperative”– a strategic dynamic distinct from the often-cited“Malacca Dilemma” – posits that the relationship between East Asian consumers and West Asian producers has evolved into a complex security complex. In this equation, external pressures on energy flows do not merely target the supplier; they expose the strategic vulnerabilities of the world's largest importer.

By relying on market data and energy flow analysis, this report argues that stability in the Strait of Hormuz is not just a regional concern for Tehran but a macroeconomic imperative for Beijing.

The anatomy of dependence

To comprehend the scale of this interdependence, one must analyze the physical movement of resources. According to data from international energy monitors, China's crude oil imports maintained historic highs in late 2025, averaging over 13.18 million barrels per day (bpd).

Despite Beijing's aggressive and commendable rollout of renewable energy capacity, its industrial base – particularly in the petrochemical and heavy transport sectors – remains structurally dependent on hydrocarbon imports.

While Chinese military doctrine has historically focused on the“Malacca Dilemma” – the risk of interdiction at the Strait of Malacca – the strategic reality of the Strait of Hormuz is more profound. Approximately 50% of China's crude imports originate from the Persian Gulf.

Unlike transit chokepoints, which can theoretically be bypassed via costly alternative routes or pipelines, Hormuz represents a point of origin. This geography creates a mutual vulnerability: Producers require market access for national revenue, while consumers require physical security of supply to maintain industrial output.

Shandong's“teapot” ecosystem and parallel logistics

A critical, often overlooked component of this energy relationship is centered in China's Shandong province, the hub of independent refineries known colloquially as“teapots.” These facilities, which account for roughly a quarter of China's refining capacity, operate in a fierce market environment in which feedstock costs determine survival.

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Western market intelligence firms such as Kpler and Vortexa estimate that in 2025 significant volumes of crude cited as around 1.3 to 1.4 million bpd flowed from Iran to China. This trade is driven by a clear economic logic: due to unilateral sanctions, this crude often trades at a discount estimated between $8 and $12 per barrel relative to Brent benchmark prices.

For Shandong's refiners, this“regulatory discount” acts as a vital subsidy, effectively lowering the cost of production for diesel and chemical derivatives and thereby maintaining the global competitiveness of Chinese manufacturing exports.

Contrary to the narrative of a centralized“smuggling” operation, industry analysts describe this trade as being supported by a “ resilient decentralized network” of maritime logistics. This system involves ship-to-ship transfers in international waters (often near Southeast Asia) and the use of diverse flagging strategies to navigate regulatory hurdles.

This example of“parallel maritime logistics” demonstrates a sophisticated capability to bypass unilateral restrictive measures, proving that market demand often circumvents political barriers.

The stability of this flow is subject to three primary strategic scenarios, each carrying distinct implications for China's economy.

Supply chain constriction scenario (the pressure campaign)

In a scenario in which Western powers intensified the enforcement of sanctions – focusing on the logistical nodes of this trade rather than just financial transactions – the impact would be primarily economic.

• Cost-push shock: If the“parallel networks” were significantly disrupted, Shandong's refiners would be compelled to replace discounted barrels with standard market-rate crude from Saudi Arabia or West Africa. Market analysts suggest that losing the ~$10/barrel discount could erode refining margins, potentially forcing a consolidation in China's independent sector and driving up domestic fuel prices.
• Resilience testing: However, historical trends suggest that“maximum pressure” often spurs adaptation. Rather than collapsing, these logistics networks tend to evolve, finding new routes and intermediaries, albeit at higher transaction costs.

Market normalization scenario (the paradox of diplomatic success)

Hypothetically, should a diplomatic breakthrough occur leading to the lifting of sanctions, Beijing would face a paradoxical challenge.

• Loss of monopsony power: Currently, China is the primary purchaser of these specific crude grades, granting it significant pricing power. In a normalized market, European majors (such as TotalEnergies or Eni) and Indian refiners would likely re-enter the market.
• Price normalization: With increased competition, the“risk discount” would evaporate. China would effectively pay a higher national energy bill, losing the comparative advantage that currently benefits its heavy industries. This scenario underscores that the current status quo, while politically complex, offers China specific economic benefits.

Kinetic deterrence scenario (the mutual shield)

The most critical scenario involves high-intensity conflict or a disruption of the Strait of Hormuz.

• The deterrence leverage: The Strait of Hormuz is a global chokepoint. Regional security analysts argue that the capability to disrupt this waterway serves as a powerful deterrent. Any unilateral military action that risks closing the Strait would spike global oil prices-simulations suggest levels exceeding $150 per barrel.
• China's Exposure: While China has expanded its Strategic Petroleum Reserve (SPR) to cover an estimated 90 days of imports, a prolonged disruption would bypass these buffers. This reality creates a mutually assured economic impact that binds the security of the Gulf to the stability of the Chinese economy. Consequently, Beijing has a vested interest in preventing any unilateral adventures by external powers that could destabilize the region.

Industrial vulnerability in the pearl river delta

The impact of these energy disruptions would not be uniform across China. The country's energy architecture is divided: the north is rich in coal, while the industrial south (Guangdong, Fujian, Zhejiang) relies heavily on imported liquid fuels and electricity.

• Regional disparity: A supply shock from the Gulf would disproportionately affect the export-oriented manufacturing zones of the south. In a $150/barrel scenario, input costs for plastics, logistics, and synthetic materials would surge, transmitting inflation directly into the global supply chain.
• Growth constraints: Economic modeling suggests that sustained high energy prices could dampen China's GDP growth by constraining industrial output, complicating Beijing's efforts to transition away from a property-led growth model.

The race between transition and security

Beijing is acutely aware of this exposure and is pursuing a dual-track strategy to mitigate risks.

Renewables expansion: China leads the world in solar and wind deployment. However, the electrification of heavy industry and maritime transport is a multi-decade process. For the medium term (2025–2030), oil remains irreplaceable.

Overland routes: Investments in pipelines via Pakistan (CPEC) or Russia (ESPO) aim to bypass maritime chokepoints. Yet, the capacity of these pipelines represents a fraction of the volume carried by supertankers through Hormuz. The maritime route remains the primary artery. The balance of fragility

The narrative of global energy is often framed as a one-way street of dependency. However, the“Hormuz Imperative” reveals a more nuanced reality of complex interdependence.

While external powers retain significant leverage through their control of global financial and maritime architectures, the resilience of“parallel export networks” demonstrates the limits of unilateral coercion. Meanwhile, China's immense reliance on Gulf energy means that the stability of the Persian Gulf is not a foreign policy luxury for Beijing – it is a domestic economic necessity.

Ultimately, this analysis suggests that the chain of global supply is safe only as long as its key nodes remain stable. In this equation, energy flows serve as a stabilizing force, creating a balance where the cost of disruption is too high for any single actor to bear lightly.

Data appendix & market estimates

Table 1: Estimated Chinese Crude Import Sources (2025)

Based on aggregation of Western market reports (Kpler, Vortexa, Customs Data)

Table 2: Economic Impact of“Discounted Barrels”

Industry estimates for independent refineries

Vortexa, and EIA reports. Analysis reflects market conditions as of early 2026.

Amirreza Etasi is a Tehran-based senior construction management expert.

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