How Iran's Instability Could Impact China's Energy Security and Taiwan

Iran's Leadership Transition Sparks Concerns for China's Strategy​

Global Attention Focuses on Iran's Future Leadership​

The death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, has created uncertainty regarding the country's leadership, drawing global attention and prompting analysts to debate a potential successor, according to a report.

China's Economic Ties with Iran and Strategic Implications​

Experts believe a key question arising from this crisis is its impact on China’s long-term strategy, particularly as Beijing anticipates geopolitical tensions involving Taiwan. China maintains deep economic ties with Iran and is the largest buyer of Iranian crude oil. Last year, Beijing purchased nearly 90 per cent of Iran's exported crude, amounting to about 1.61 million barrels per day.

The 25-Year Cooperation Agreement​

The two countries are also linked through a 25-year cooperation agreement worth about $400 billion, which covers areas such as energy, infrastructure, and trade. Political stability in Iran is therefore vital for China’s economic interests.

China's Influence and the Islamic Revolutionary Guard Corps (IRGC)​

Although China does not have a formal role in Iran's leadership transition, analysts suggest Beijing possesses influence through its ties with powerful institutions such as the Islamic Revolutionary Guard Corps (IRGC). According to the Council on Foreign Relations, the IRGC plays a crucial role in shaping Iran's political future, and any new Supreme Leader would likely require its support to govern effectively. China has reportedly strengthened its relationship with the military establishment in recent years, especially after the death of former Iranian president Ebrahim Raisi in 2024.

Protecting Investments and Bypassing Sanctions​

For Beijing, the situation in the Persian Gulf is not solely about protecting investments in Iran. Analysts indicate that China has spent years developing systems to bypass Western sanctions, including utilizing non-dollar payment systems and alternative shipping networks. These mechanisms were partly built while trading with Iran, but experts believe they also serve as a testing ground for how China might handle sanctions in a future crisis involving Taiwan.

Energy Security and the Strait of Hormuz​

Energy security is a significant concern for China. A large portion of the world's oil passes through the Strait of Hormuz, and around 84 per cent of that oil goes to Asian markets. China alone imported about five million barrels per day through the strait last year, representing nearly half of its total crude imports. Any disruption in this route could significantly impact China's industrial economy.

Potential Oil Price Surge and Economic Impact​

Energy analysts warn that if Iran were to block or seriously disrupt the Strait of Hormuz, global oil prices could surge to between $100 and $130 per barrel. Such a spike could slow China's economic growth at a time when its economy is already facing challenges. Although China has built large strategic oil reserves, these stockpiles would only provide temporary relief in the event of a prolonged disruption.