China buys more than 80 percent of Iran’s oil despite US pressure
The U.S. Treasury on Monday rolled out “Operation Economic Outcast,” an expansive sanctions campaign designed to sever what Treasury Secretary Scott Bessent described as “every remaining lifeline” sustaining Iran’s economy. The Treasury announced penalties against more than 60 entities, including Chinese firms that help Tehran procure nuclear and missile technology, sell oil and run cyber operations, but the new measures fell short of the more forceful secondary sanctions on China that analysts said would be required to deliver a decisive blow.
The initiative builds on more than 1,000 sanctions the Trump administration has placed on Iran since returning to power in January 2025. Combined with military operations and a naval blockade of Iranian ports, the effort has damaged Iran’s economy and collapsed its currency. But it has not changed Tehran’s military posture in the Middle East or deterred it from seeking nuclear weapons, and Iran has continued attacks on shipping in the Strait of Hormuz.
The gap between the announcement’s rhetoric and its scope reflects Washington’s effort to isolate Iran economically without provoking a broader confrontation with Beijing. Trump visited Chinese President Xi Jinping in May, and the Chinese leader is expected in Washington next month for a follow-up summit. China has previously responded to U.S. pressure by restricting access to rare earths, a move that hurt U.S. manufacturers during last year’s tariff war.
“The rhetoric was ferocious, but the punch less so,” said Daniel Fried, a former U.S. diplomat now at the Atlantic Council. “Dealing a crippling blow to Iran’s economy would probably require taking on big Chinese firms and banks.”
China buys more than 80% of Iranian oil exports, according to U.S. officials, and has built an elaborate system to move sale proceeds around the world without triggering U.S. sanctions. Iranian front companies use Chinese banks to buy Chinese goods and move cash via currency exchange houses to the Middle East and Iran. The effort to isolate Iran from the U.S. dollar has pushed Iran to increasingly use China’s currency, the yuan, blunting the effect of U.S. sanctions.
The Treasury said Monday it would levy future penalties on countries and entities doing business with Iran in five sectors: digital assets, technology, gold, aviation and shipping. Bessent said President Trump is making phone calls to world leaders requesting they stop doing business with Iran and that the Treasury would soon sanction an unnamed financial institution for sanctions evasion.
At a press conference announcing the sanctions, Bessent was asked twice whether the administration would strengthen penalties against Chinese banks and businesses. “Every country, every entity should know that they should be prepared to face U.S. sanctions,” Bessent said. “No one is above this.”
Former Treasury officials and outside analysts said the structure of the new effort leaves Beijing room to adjust. “Treasury structured the whole thing to give China room to adjust quietly,” said Kerri Bitsoff, a former Treasury official. The “framing means China can change behavior without its banks being targeted,” she said.
Since the war against Iran began, the U.S. has sanctioned Chinese oil tankers and oil infrastructure, though China has continued to purchase Iranian oil. Although the U.S. blockade has limited Iranian oil exports recently, China imported more than 500,000 barrels a day so far in August, according to Kpler. Much of the oil originates from ship-to-ship transfers that move crude from sanctioned tankers onto unsanctioned ones before shipping to China.
On Monday the U.S. sanctioned a China-owned oil tanker it says has transported millions of barrels of Iranian oil to China this year, alongside companies and individuals in China and Hong Kong that helped Iran obtain sensitive goods such as navigation instruments for missiles. But the U.S. did not target any prominent Chinese banks or companies more clearly connected to the U.S.-led global financial system.
China’s foreign ministry reiterated its opposition to U.S. sanctions in a press briefing Tuesday. “Economic warfare will only heighten tensions and could disrupt the global economy,” foreign ministry spokesman Lin Jian said. China “will take all necessary measures to firmly safeguard its rights and interests,” Lin said.
Chinese retaliation against broader secondary sanctions “is a real threat now,” said Edward Fishman, a senior fellow at the Council on Foreign Relations. “That’s a whole new factor in the U.S.-China dynamic as of last year.”
The U.S. effort has increasingly resembled a game of whack-a-mole. The Treasury has sanctioned little-known firms and shell companies in Hong Kong, China, the United Arab Emirates and Turkey, only for other players to emerge as facilitators of Iranian oil sales, money flows and imports.
Critics said Monday’s announcement fell short of its billing. Bessent has said the administration’s pressure campaign seeks to create conditions for the collapse of Iran’s government, dubbing the initiative “Economic D-Day,” a reference to the World War II campaign. “Nothing close to the hype,” said Charlie Brown, a researcher with United Against Nuclear Iran, a U.S. advocacy organization that is calling for more sanctions against banks in China and elsewhere that facilitate the purchase of Iranian oil.
It is possible the campaign could still cajole China into doing more to pressure Iran while avoiding a more direct confrontation between the world’s two largest economies. “This sort of pressure can work, and I have seen it be more effective than actual sanctions,” Bitsoff said. “The test will likely be after the summit.”