China indicated Tuesday that it would not adhere to demands from the Treasury Department to cut off all economic ties to Iran, citing risks to international stability and asserting it would not bow to “economic warfare.”
Chinese Foreign Ministry spokesperson Lin Jian said at a press conference that Beijing would not accede to U.S. demands regarding Iran and that its current policy aligns with international law.
“Economic warfare and maximum pressure provide no solution. On the contrary, they only serve to fuel tensions and lead to risk spillover, which will disrupt the global economic and financial order, and harm the legitimate rights and interests of other countries,” Mr. Lin said. “China’s cooperation with Iran is conducted within the framework of international law, thus should not be disrupted. China is closely following the developments, and will do everything necessary to firmly safeguard its rights and interests.”
The Treasury Department announced Monday a major expansion of secondary sanctions targeting Iran, aiming to force other nations to cut all economic ties with the Islamic Republic.
Treasury Secretary Scott Bessent said during a press conference that countries retaining economic ties with Iran would face harsh consequences. Notably, nations found in violation of the new restrictions could be cut off from the U.S. dollar system.
However, Mr. Bessent’s announcement gave scant details on exactly what the U.S. would do to countries maintaining economic relations with Iran as he warned potential violators.
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“Well, we are giving everyone the opportunity to remedy bad behavior. Why would I want to blow up the global financial system?” Mr. Bessent said when asked why he did not impose sanctions immediately.
China remains one of Iran’s most valuable links to international markets. Beijing purchases about 90% of Iran’s crude oil, and Tehran maintains access to China’s banking system, which helps Iran mitigate the effects of Western sanctions.
The Treasury Department designated more than 60 entities and ordered Bank Melli Iran to shut down, but Chinese state banks were largely spared.
If U.S. sanctions hit Chinese banks hard and cut them off from the U.S. dollar system, it could undermine the dollar’s centrality in global trade and, in turn, the power of Western sanctions.
Emily Kilcrease, senior director of the Energy, Economics and Security Program at the Center for a New American Security, said removing Chinese banks from the U.S. dollar system is the “nuclear option.”
“They are the largest banks in the world and they facilitate China’s trade with the world,” Ms. Kilcrease told The Washington Times. “And so you have to keep in mind that if you sanction one of those Chinese banks, you’re going to have a damaging effect on overall global financial stability by taking out one of the major institutions in a very disruptive, abrupt way.”
It would be possible for the U.S. to target specific, smaller banks in China that would not have the same outsized effect on global markets. Ms. Kilcrease said the Biden administration held discussions on adopting such measures over China’s support for Russia following its invasion of Ukraine in 2022.
However, the Biden White House decided against imposing sanctions even against smaller banks in China, likely over the dramatic impact it would have on U.S.-China relations.
“Because at the end of the day, the U.S. doesn’t want to sanction a Chinese bank. It’s bad for the relationship; it’s bad for global financial stability. But they want China to take their warnings seriously, and so maybe there would be a warning shot sanctioned there,” Ms. Kilcrease said.
Putting pressure on China’s relationship with Iran could not come at a more sensitive time, with Beijing having more strategic leverage than ever. China last year agreed to temporarily halt its export restrictions on rare earths, essential minerals used in the production of consumer and military goods, after extensive trade talks with the U.S.
If the U.S. were to press the issue of China’s economic relationship with Iran, it could risk further damaging its trade relationship with Beijing as the closure of the Strait of Hormuz continues to strain American wallets.
President Trump is also preparing to meet with Chinese President Xi Jinping next month in Washington. The meeting follows a May summit between the two leaders in China.