China In Eurasia

The United States has imposed sanctions on a network of people and firms accused of facilitating the sale of millions of barrels of Iranian oil to China as U.S. President Donald Trump’s administration seeks to bring Iran’s crude exports to zero.

The new tranche of sanctions is an opening shot against Beijing and Tehran, designed to put China on notice without disrupting back-channel discussions to explore the potential for a deal with Iran that restricts its nuclear program.

Analysts say these sanctions -- which targeted individuals and vessels linked to the so-called shadow fleet of ships that transport embargoed Iranian oil -- could be effective but will not drive Iran’s oil exports down to zero. Tougher measures would be needed to do that -- going after Chinese institutions, such as banks that process oil transactions, for example-- but that could risk escalating tensions between the world’s top two economies.

“This is a toe in the water, but not because Trump necessarily wants to tread carefully,” said Tom Keatinge, director of the Center for Finance and Security at the Royal United Services Institute (RUSI) in London. “This is a way to send a message and put everyone involved in moving Iranian oil on notice.”

Why Is Trump Hitting Iran?

Iran’s economy is heavily reliant on oil revenues, which the U.S. State Department on February 6 said are used to fund “terrorists and proxy groups,” referring to Iran’s network of regional armed groups that oppose Israel and the U.S.

The new sanctions target over a dozen people and companies in China, India, and the United Arab Emirates, including Iranian and Indian citizens and crew management firms as well as a collection of tankers.

“These sanctions, and what is sure to follow, will almost certainly have an impact,” said Nader Itayim, a Middle East energy expert at the U.K.-based Argus Media. “The question really is how big that impact might be. And that will ultimately depend on how seriously the Trump administration chooses to go after the Iranian oil trade.”

The 2015 nuclear deal lifted U.S. sanctions, allowing Iran to sell oil. Trump withdrew from the deal in 2018, reimposing sanctions that cut exports to around 400,000 barrels per day.

Iran later boosted sales through sanctions evasion, rising Chinese demand, and looser U.S. enforcement under former President Joe Biden.

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The new sanctions are part of the Trump administration’s return to the "maximum pressure" campaign that defined the Republican president’s Iran policy in his first term. Trump says Iran is "too close" to developing a nuclear bomb, while Tehran has long claimed its atomic program is peaceful.

“One of his objectives now is to bankrupt Iran,” Keatinge said. “Since [Trump] was last president, the sanctions community at large -- public and private -- have learned a lot about how to target a country's oil revenue and go after the broader infrastructure, largely from the experience with Russia's own shadow fleet.”

As part of its effort to evade Western sanctions on its oil exports and help fund its war against Ukraine, Russia has employed a shadow fleet of hundreds of aging tankers largely registered in non-Western jurisdictions to export the majority of its oil to market.

How Does The 'Shadow Fleet' Operate?

Iran’s own “shadow fleet” of tankers has been crucial to its ability to evade sanctions and covertly transport oil to China and other destinations.

This strategy includes ship-to-ship transfers, intermediaries, concealed financial transactions, and rebranding the oil to disguise its Iranian origin, making it appear to come from another country.

These methods have allowed Iran to keep moving oil and generating revenue despite sanctions.

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Why Are U.S. Sanctions Against Iran's Oil Exports Ineffective?

According to United Against Nuclear Iran, a nonprofit group that campaigns against threats it says are posed by Tehran, 587 million barrels of oil were moved by Iran in 2024 and 91 percent of those exports went to China.

China has long been the largest buyer of Iranian oil, but since 2022 it has stopped officially purchasing it to avoid U.S. sanctions, according to data from commodities research firm Kpler.

Despite the official stop in purchases, billions of dollars' worth of sanctioned Iranian oil have still found their way to China through the shadow fleet network used by Iran.

What's Trump’s Next Move?

U.S. officials have sought to prevent Iran from shipping the oil by pressing China and other countries not to participate, and imposing sanctions on vessels that it believed could help transport the oil.

The latest round of sanctions targeted vessels and shipping companies said to be involved in moving Iranian oil and Keatinge, the expert from RUSI, says this reflects the evolving playbook developed in recent years as the United States and its allies have targeted ships moving Russian oil.

He says these measures could be expanded beyond just targeting ships that move the oil to also sanction other aspects of the shadow fleet infrastructure, such as the companies that insure the vessels, the agencies that recruit the crews, the ports that receive the ships, and a broader diplomatic campaign to pressure the countries that register them.

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Argus Media’s Itayim believes such moves are likely to scare off “the more risk-averse Chinese buyers” but would have a limited impact in curbing the flow of Iranian oil. To drive Iranian oil exports down further, he says, would require more pressure on Chinese ports and on buyers and intermediaries, including even banks in the country.

Doing so could have ripple effects on Washington’s ties with Beijing and escalate tensions, which were recently inflamed with a new round of tit-for-tat tariffs on February 4.

Keatinge says that curbing Iranian oil could be part of a broader conversation between Trump and Chinese President Xi Jinping and that the recent sanctions provide a way to ramp up pressure on Tehran without fueling additional tensions with Beijing.

“China is the big problem to solve if you want to squeeze Iranian oil, but does Trump want a sanctions war with Xi?” he said.

U.S. President Donald Trump and Chinese leader Xi Jinping have fired the first shots of a new trade war with an exchange of hard-hitting tariffs that could have far-reaching consequences for the U.S.-China rivalry.

The tit-for-tat levies are a revival of the two years of trade tensions during Trump's first term in the White House, and they, once again, could bring economic pain to China.

But unlike that first episode fought between Beijing and Washington, Xi now comes into the second trade war with more cards to play. This could open up new opportunities for China as it looks to challenge the United States on the global stage.

In order to reap those gains, Beijing will first need to navigate the significant complications of a renewed trade war, which will be more damaging economically for itself than for the United States and comes as China is grappling with slowing economic growth at home.

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China Strikes Back With Tariffs As Trade War With Trump Heats Up 

The Chinese economy is driven by manufacturing and exporting goods, and the United States is its largest single-country trading partner. The 10 percent U.S. tariffs that came into effect on February 4 will hurt the Chinese economy, and the new tax is additional to the remaining levies brought in by former U.S. President Joe Biden and Trump in his first term. The move by Trump also leaves the door open for more tariffs to be added by Washington that could further hit China.

But Xi is also better equipped than the last time he clashed with Trump.

Beijing seems to believe it can afford to escalate trade tensions and hit back with tariffs of its own that are set to enter into force on February 10. These include 15 percent Chinese levies on U.S. coal and liquefied natural gas (LNG), as well as 10 percent tariffs on crude oil, farm equipment, and some cars.

More strategically, Beijing has also hit back with tariffs targeting crucial materials needed by U.S. industry of which China mostly controls the global supply. Those include critical minerals such as tungsten, tellurium, ruthenium, and molybdenum, which are needed for the production of some batteries and other high-tech goods.

That follows a Chinese export ban in December 2024 to the United States of minerals like antimony and gallium that are needed to manufacture some semiconductors.

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This comes as both Beijing and Washington are locked in a deepening competition over the future of global technology. The United States has so far stayed ahead, in part given its access to advanced semiconductors -- largely designed in the United States and produced in Taiwan -- needed to fuel the next generation of goods, such as artificial intelligence (AI), that are forecast to shape the future global economy.

China has its own technology ambitions and has so far endured the pain brought by measures from both Trump and Biden, which have included lobbying U.S.-allied governments to reject Chinese equipment for next-generation telecom networks and export bans on some microchips.

Those measures were successful in part due to coordination with other countries, many of which Trump has also threatened to hit with tariffs -- and this is where Xi is already looking for openings.

While Trump has issued a monthlong suspension of tariffs against Canada and Mexico, he has said similar measures could be facing the European Union. After the announcement, EU foreign policy chief Kaja Kallas said that "the one laughing on the side is China" as it looks to further a wedge between Brussels and Washington and launch a charm offensive in the bloc.

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European Commission President Ursula von der Leyen -- who has previously been more hawkish on China and hit back at Beijing on trade issues recently -- also opened the door for something of a rapprochement when she said in January that she saw "an opportunity to engage and deepen our relationship with China and, where possible, even to expand our trade and investment ties.”

Similar opportunities could present themselves to Xi elsewhere around the world.

In the meantime, the exchange of tariffs sets the stage for further talks and a potential deal between Trump and Xi.

China still needs access to U.S. technology, and economic pain at home could create new pressure for Xi. The recent U.S. tariffs were primarily implemented over Beijing not halting the flow of illicit drugs into the United States and Trump has floated the idea of tying tariffs to the fate of TikTok, which he has said should be half owned by an American company.

The White House said the two leaders don’t plan to speak until later this week, but Trump has signaled that he's open to negotiations and reportedly also said he wants to visit China within the first 100 days of his administration.