Young, ambitious oil analysts should treat themselves to a cup of tea every now and then. Why not enjoy it in the lush green hills outside Ningbo, China’s most important crude oil port?
Tankers from all over the world come here to unload their cargoes. From the hills behind the Xinyi guesthouse, there is a magnificent view of the ships coming and going. Some carry oil from Iran, others from Iraq, Saudi Arabia and the United Arab Emirates. Last year, Ningbo and the neighbouring city of Zhoushan handled 1.4 billion tonnes of cargo, more than any other port in the world. The traffic here tells us a great deal about the drama now unfolding.
Ningbo lies just south of Shanghai and has a population of ten million. The city acts as a funnel, channeling oil into the densely populated Yangtze River Delta, a vast market of 250 million people. And although China has embraced the green transition, the country remains dependent on crude oil from abroad. It is by far the world’s largest oil importer and is likely to remain so for many years to come.
Iranian oil is not particularly important to China. Last year, it accounted for around 12 per cent of the country’s total crude oil imports. Donald Trump and his Treasury Secretary, Scott Bessent, are determined to reduce that figure to zero. Yet their chances of succeeding are slim, because China will not allow the United States to dictate its trade policy. “We decide for ourselves whom we trade with,” is the refrain in Beijing.
Both conventionally operated oil tankers and vessels belonging to the shadow fleet arrive at the oil terminals in Ningbo and Zhoushan, carrying sanctioned oil to Chinese buyers. The fleet is a loose network of tankers, owning companies and intermediaries used to transport, in particular, Iranian and Russian oil outside the normal trading system. The ships frequently change their names, flags, owners or operators, making them difficult to identify.
To make tracking even harder, oil is often transferred from one tanker to another at sea, particularly off Malaysia and Singapore. In addition, the crucial AIS signal is switched off, manipulated or falsified, making a vessel appear to be somewhere other than where it actually is.
China’s leaders may be ideologically strict, but when money and profit are involved, they are less particular. The international shadow fleet therefore sails with Beijing’s tacit consent. What matters most is that it provides China with cheap oil and greater energy security. China also regards America’s unilateral sanctions against Iran as illegal because they lack a basis in international law and have no mandate from the UN Security Council. Beijing objects in particular to Washington’s use of secondary sanctions — in this case against Chinese companies involved in the oil trade.
But now the die has been cast. At his press conference earlier this week, Bessent announced that the United States would launch “its biggest financial offensive against an adversary ever.” But how?
Stopping or boarding the many vessels in the shadow fleet would not only be difficult, but also risky. That is precisely why the United States will instead target the Chinese refineries buying the oil, or the banks handling the payments. The message is clear: companies that buy or finance Iranian oil risk losing access to dollars, US banks and the American market.
The only question is how far the United States is prepared to go. Punishing smaller players is one thing. But will Trump dare to blacklist major and mid-sized Chinese companies because they continue to handle Iranian oil?
If the answer is yes, the conflict between Washington and Beijing will enter a new and more dangerous phase. Such an escalation would not only affect China’s oil imports; it could also disrupt the global economy.
The timing could hardly be worse. In just one month, President Xi Jinping is due at the White House. He is not a man who likes to be pushed around. When he received Trump in Beijing in May, he projected considerable confidence. After two days of talks, the two agreed to establish a “constructive relationship based on strategic stability.” Now Trump is doing the exact opposite. At the same time, he is considering imposing an additional 7.5 per cent tariff on Chinese goods, citing China’s industrial overcapacity.
With these moves, Trump is putting China under pressure, but there is nothing to suggest that Xi will back down — at least not on matters he considers important. As the leader of the world’s second-largest economy, he feels strong enough to defy the United States. He also has time on his side. In two and a half years, Trump will leave the White House, while Xi may remain in power in China for many years to come.
If China were forced to halt all oil trade with Iran, Xi would have several alternatives, including Russia, Saudi Arabia, the United Arab Emirates and Brazil. No problem. Iran, by contrast, would be in a far more difficult position, since it sells around 90 per cent of its oil to China.
Iran is already in a deep economic crisis. Before the war, the country exported around 1.4 million barrels a day, mainly to China. In August, shipments have fallen to around 534,000 barrels a day. If all Iranian oil exports to China were to cease, the regime would struggle to find buyers capable of replacing that market. The inflow of foreign currency would then begin to dry up.
The next step would be growing difficulty in paying for food, medicines, machinery, spare parts and everything else Iran needs from abroad. As the Iranian currency loses value, discontent among ordinary Iranians would rise. But a deep economic crisis affecting the majority of the population does not necessarily lead to the collapse of a regime. North Korea is a good example of how a cynical regime can shift the suffering onto its people and still survive.
For decades, the Kim dynasty has based its power on rewarding the police, the security apparatus and the armed forces. Iran’s ayatollahs follow the same logic and will do everything they can to protect these vital pillars of the regime. If an officer in the Revolutionary Guard continues to receive his salary, housing and food for his family, while a teacher or factory worker finds it increasingly difficult to make ends meet, the chances increase that the officer will continue to defend the system when the protests begin.
China and Iran have for many years maintained a close strategic relationship based on oil and shared security interests. It is now facing its greatest test ever. From the hills around Xinyi outside Ningbo, it will be fascinating to watch the movements of the tankers over the coming weeks. If the ships carrying Iranian oil keep arriving, Trump has a problem. If they disappear, Iran has a much bigger one.
faeroevi@online.no
