Beyond the Narrative: Why Iran is China’s Eternal "Backup Plan" | Digging into China

Hi, I'm Dong Xiong. Welcome to Digging into China, where we take a deep dive into what's really happening in China and share some unique insights. Many people think that if Iran gets hit, China suffers the most. They couldn't be more wrong. On February 28, 2026, missiles from the U.S.-Israeli coalition struck Tehran. Iran's Supreme Leader Khamenei was killed in the air strike. The whole world was waiting to see how China would respond. Well, Beijing's response came. They issued a statement, evacuated their citizens, and that was it. A lot of people say China is being weak, but that's not the truth. The truth is that the so-called China-Iran strategic alliance has never actually existed. Iran has never been the partner China relies on most in the Middle East. Between China and Iran, there is no alliance, no deep friendship. There is only business. And it's the kind of business where both sides are constantly calculating, always watching their backs for a potential stab. In today's video, let's talk about what the real relationship between China and Iran is actually all about. Before 1971, China and Iran had almost no formal contact. In fact, they were on opposite sides. At the time, Iran was one of America's most important allies in the Middle East. The Pahlavi dynasty's military used American weapons, sold oil to Western markets, voted for Taiwan and the UN, and occasionally condemned China. From geography to ideology, these two countries were total strangers. The door only opened because of the shift in US-China relations. In 1971, where the signal went out that Nixon was going to visit China and break the ice, Iran read the room immediately. King Pahlavi sent his sister Princess Ashraf on a secret trip to Beijing to meet with Zhou Enlai. By August of that same year, China and Iran officially established diplomatic ties. But even after that, the relationship didn't have much substance. They've sent out holiday greetings, but there wasn't much real interaction. In 1979, the Islamic revolution broke out in Iran. The Pahlavi dynasty collapsed, and Khomeini took over. On the new regime's enemy list, the US was number one, Israel number two, and China weren't left off either. During those couple of years, anti-China slogans even appeared on the streets of Tehran. Relations were near freezing. But right then, an opportunity showed up. In September 1980, Iraq launched a surprise attack on Iran, starting the Iran-Iraq war. That war lasted eight years. Both sides drained their national strength. The death toll was estimated at nearly a million, and military spending hit almost $200 billion. It was the largest ground war of the second half of the 20th century. Which side did China take? Neither. China was busy selling weapons. Look at China's situation back then. The reform and opening up had just started, and foreign currency was extremely scarce. Deng Xiaoping was pushing to downsize the military and cut the defense budget. A huge number of defense plants had lost their domestic orders and were on the verge of shutting down. Workers had nothing to do. Then came the Iran-Iraq war. These two oil-rich big spenders were fighting to the death and looking all over the globe for weapons. The US supported Iraq, and the Soviet Union also leaned toward Iraq. Iran, meanwhile, was under a double blockade by both the US and the Soviets, and was desperately short of gear. Iraq had money, but they thought American and Soviet weapons were too expensive and came with too many strings attached. The Chinese defense industry had one main advantage. It was cheap, available in bulk, and didn't ask about politics. So something interesting happened. Both Iraq and Iran were buying weapons from China. What did Iraq buy? About 1,500 Type 59 and Type 69 main battle tanks, J-7 fighters, H-6D bombers, plus tons of cannons, armored vehicles, and anti-ship missiles to go with them. And what did Iran buy? J-6 and J-7 fighters, loads of armored vehicles and artillery, and most importantly, the HY-2 silkworm anti-ship missiles. What were the silkworms for? To blockade the Strait of Hormuz and hit passing oil tankers. Throughout the war, Iran used these missiles to cause a massive number of incidents in the Strait. In October 1987, a tanker flying the American flag was hit by a silkworm missile. The US reacted very strongly and started pressuring China over its arms sales. Think about it. Iraq bought H-6D bombers and missiles to hit Iranian tankers, and Iran bought silkworms to blockade the Strait and hit passing tankers. Both sides were using weapons from the same seller to hit each other's ships. There was a saying inside the Chinese defense industry at the time, build for Iraq on odd days, build for Iran on even days. Representatives from both countries were staying in the same hotels in Beijing, seeing each other all the time, each buying their own stuff with a silent understanding. In an era where foreign currency was so tight, this arms business was huge. It didn't just save a bunch of bankrupt factories, it filled a massive hole in the funding for the early reform and opening up. The Iran-Iraq war ended in August 1988. The war was over, but the business between China and Iran didn't stop. It just shifted focus towards something even more sensitive, nuclear technology. In fact, before the war even ended, China was already setting up its next move, providing Iran with nuclear tech support. This included helping build research reactors, providing nuclear raw materials, and helping build uranium conversion facilities. The driver behind this was the same as the arms sales, pure business. Iran provided the money and oil, China provided the tech. Both got what they needed. However, after 1989, China's motivation changed. Two things happened at once in 1989. First, after the crackdown on the Tiananmen democracy movement, the West hit China with sanctions and diplomatic isolation. China was isolated and desperately needed to rebuild its diplomatic network. In this context, Middle Eastern countries held special value for China, and Iran was among them. This wasn't just about the business anymore, it was a diplomatic tool to break the blockade. Second, the Bush administration announced it was selling 150 F-16 fighters to Taiwan. Around that time, Iranian President Rafsanjani visited Beijing and relations warmed up. Consequently, in 1990, the two countries secretly signed a nuclear cooperation agreement. In 1991, IAEA inspectors discovered that China had been exporting uranium to Iran, and the agreement was exposed. The US was furious. In 1992, despite continued pressure from the US, China and Iran signed a new nuclear cooperation deal, which included contracts for two 300 megawatt nuclear power plants. Why did China dare to continue under pressure? Because by then China had started using this as a diplomatic bargaining chip against the US. You pressure me on the Taiwan issue, then I will give you a headache with Iran nuclear cooperation. But this call came with a cost. The US kept up the pressure, making China-Iran nuclear cooperation a core issue in US-China relations. The pressure got heavier every year. By the mid-1990s, China's math changed. WTO negotiations were moving forward. The benefits of joining the international economic and trade system were far more important than continuing nuclear cooperation with Iran. The price was too high. It wasn't worth it anymore. During Jiang Zemin's visit to the US in 1997, he promised Clinton that China would phase out direct nuclear tech cooperation with Iran. The official reason was to follow international obligations. The real reason? The math had changed, and the numbers didn't add up anymore. From the weapons of the Iran-Iraq war to the nuclear tech after 1989, this history proves one thing. Every time China gets closer to Iran, there is a specific reason, foreign currency, breaking diplomatic isolation, or a bargaining chip against the US. And every time they pull back, there is also a specific reason, usually that the cost has exceeded the benefit, or they needed to protect a more important relationship. Not once was it because of ideology, strategic trust, or some inseparable common interest. The relationship between China and Iran hasn't been an alliance from the start. It's been pure business. In the years before the Iran nuclear deal was signed, Western companies left Iran due to sanctions, and Chinese companies jumped at the chance. Energy development, railways, telecommunications, ports, China was Iran's largest source of foreign investment. Iran couldn't live without China's money. But Iran wasn't satisfied with that. They were always waiting for a chance, waiting for Western sanctions to loosen so they could switch to a better partner. In 2015, that chance arrived. As soon as the Joint Comprehensive Plan of Action was signed and sanctions loosened, Iran immediately turned its eyes to Europe. Airbus, Airstom, Siemens, and Renault all got invitations. Meanwhile, the progress of Chinese projects was intentionally and visibly slowed down. Within months of signing the deal, Iran unilaterally canceled 14 infrastructure contracts with Chinese companies, reportedly worth over $12 billion. Some of these contracts were already signed, teams were already deployed, and some early funding had been invested. But they were forced to stop. Chinese companies suffered heavy losses. Iran's logic was simple. Western technology, capital, and market connections were worth more than what China had to offer. European companies did come, but not for long. In 2018, Trump announced the U.S. was unilaterally pulling out of the deal and then restarted the full suit of sanctions. The effect was immediate. Iran's currency, the rial, crashed by over 60% in two years. Inflation hit over 40% at one point. Oil exports were cut in half from nearly 2.5 million barrels a day to less than half a million. Iran's foreign currency income almost dried up, and the government faced a massive budget gap. Meanwhile, European companies had a choice to make, the Iranian market or the U.S. market. The U.S. market is over 40 times larger than Iran's. It wasn't even a contest. European companies all pulled out. For Iran, this was an existential crisis. So, Iran went back to China, and China took them back. By 2020, Iran made a strategic judgment. The path to the West was blocked, so they had to turn East. This wasn't a new idea, but the pressure of sanctions made it urgent. Iran started pushing for a deep tie-up with China. In March 2021, Foreign Minister Wang Yi visited Tehran, and the two countries formally signed the China-Iran Comprehensive Cooperation Plan. This was a 25-year deal, and the reports cited a figure of $400 billion in investment. This cycle proves one thing. In Iran's strategic priorities, China is never the first choice. If there is a chance to deal with the West, China is pushed aside. If the West closes the door, China is the backup. China takes them back every time, pays the price every time, and then waits for the next round. If you understand this, you can see the 25-year agreement for what it really is. The official Iranian spin was direct. This proves that the U.S. attempt to isolate Iran has completely failed. On the Chinese side, the wording was about deepening the comprehensive strategic partnership, fitting into the overall Belt and Road narrative. Both sides were using this agreement to tell a story to their own audience. The question is, what is actually in the agreement? The public version covers people-to-people exchanges, infrastructure, military, banking, telecom, ports, and railways. The $400 billion figure came from a draft cited by the New York Times, which has since been repeated by other media and became the most famous label for the deal. But the full content has never been made public, which in itself is a signal. A real functional strategic cooperation agreement needs specific funding commitments, delivery schedules, milestones, and penalty clauses. This agreement has almost none of those. It's just a framework and a statement of intent. In the words of the Chinese foreign ministry, it's about planning long-term cooperation prospects. Planning a prospect and signing a contract are two very different things. Is there anything actually happening on the ground? There are two main things. First, oil trade is shifting to renminbi settlements to bypass the dollar system. Iran is excluded from the SWIFT system and can't use dollars. So the renminbi channel China provides is Iran's actual exit strategy to break that limit. This part is really working, handled through the Bank of Kunlun and the shadow fleets. Second, China's Beidou satellite system provides guidance support for Iranian missiles. This has been reported in Iranian media. China has never officially confirmed it, but they haven't denied it either. Other than these two, most of the infrastructure, investment, port development, and railway upgrades written in the agreement are just staying on paper. It's been five years since the agreement was signed. What does it look like now? First, the money isn't necessarily coming back. China exports equipment and industrial goods to Iran and should get paid in return, but the sanctions have cut off all normal settlement channels. They have to use renminbi or barter. These unconventional channels are inefficient and poorly regulated. Discounts, delays, and losses on payments are normal. If something goes wrong, there is almost no way to get the money back. The way Iranian oil actually gets into China says even more about the nature of this relationship. According to the U.S. Treasury, Iranian oil is first shipped to the waters near the Rio Islands close to the Strait of Malacca. There, it undergoes ship-to-ship transfers, gets relabeled as a Malaysian brand, and only then enters the Chinese market. The main buyers are small and medium-sized private refineries in Shandong province, known in the industry as teapot refineries. They can't even do trade out in the open. They have to take this sneaky roundabout way. This is the reality of that 25-year comprehensive strategic partnership on the ground. The second dilemma is that Iran hasn't left its strategic assets to China. The port of Chab-Ha is a perfect example. This port is in the southeast corner of Iran, only 170 kilometers away from Gwadar port, the end of the China-Pakistan economic corridor. It has huge strategic value for China. But since 2018, Iran has given the operating rights of the port to India. In 2024, they signed a further 10-year cooperation deal with India committing $370 million. China hasn't had a chance to get in the game from start to finish. In Iran's strategic calculus, even for projects where China has a geographic interest, as long as there is a better option, China is not a priority. Worse yet, some of China's business with Iran has seriously damaged China's international reputation. For example, Chinese companies like Huawei and ZTE were deeply involved in building Iran's telecom network. They also helped Iran deploy surveillance tech, facial recognition systems, and big data tracking platforms. In January of this year, massive protests broke out in Iran, the largest since 1979. During the crackdown, Iran almost completely cut off the Internet nationwide. According to Internet monitoring groups, at the peak of the tension, connectivity dropped to below 4% of normal levels. After the crackdown, the U.S. government announced additional sanctions on the Chinese companies involved, saying they helped an authoritarian government suppress civil liberties. The EU also passed a resolution specifically naming China for providing surveillance tech to Iran. But from the perspective of the Chinese companies, they think helping Iran build infrastructure is normal commercial cooperation. The contracts are legal, the payments are documented, and they are just doing business. There is no reason to walk away from money. Plus, they argue they don't have the power to decide how the Iranian government uses these systems. If Iran uses it to cut the Internet or track protesters, that's a political choice by the Iranian government. And because of this, China is very cautious about cooperating with Iran. They haven't gone all in. After talking about these dilemmas, let's look at some numbers, which might be more intuitive. In 2021, when the cooperation plan was signed, bilateral trade was around $15 billion. Looking back, the historical peak in 2014 was about $50 billion. In 2024, it was about $13.4 billion. It continued to drop in 2025. That's a shrink of over 70% from the 2014 peak. The 25-year agreement has been signed for 5 years, yet the trade volume is heading downward. Of course, this doesn't count the oil, since that goes through the shadow fleets and doesn't show up in official data. But even if you count debt, the overall scale of the relationship is still long away from that $400 billion. For comparison, what was China's trade with Saudi Arabia during the same period? In 2024, it was $107.5 billion. Saudi Arabia is Iran's arch-rival. They had no diplomatic ties for 7 years until China broke a restoration in 2023. Yet, China's trade with Iran's rival is about 8 times larger than its trade with Iran. These numbers tell you exactly how much that $400 billion deal is actually worth. For Iran, the most important function of this agreement is political propaganda. Domestically, they can tell their pressured citizens, we aren't as isolated. China is with us. Internationally, they can send a signal to the US, if you sanction me, I'll just lean on China. For China, the agreement is a strategic allocation. An overall game against the US, keeping an Iran card is useful. As for whether the $400 billion actually happens, nobody really cares. Both sides are telling a story to outsiders, but the execution has to face reality. The sanctions have blocked all of Iran's normal financial channels, and Iran's policies change on a whim, making it impossible for foreign investors to make long-term plans. China's state-owned and large private enterprises generally choose to stay away to avoid sanctions risk. These three obstacles combined mean any agreement is hard to truly implement. It's not a lack of will, it's a lack of conditions. On Feb. 28, the U.S.-Israeli coalition began attacking Iran. That night, the news came in waves. First, satellite images of explosions, then photos of smoke on the ground, and then Trump's post on social media, Khomeini is dead. The U.S. and Israel launched a joint strike targeting high-level official areas, military facilities, and the Revolutionary Guard Command. This is one of the most violent political shocks in the Middle East in decades. Where was China then? Beijing's reaction came quickly, but the wording was precisely controlled. The foreign ministry spokesperson said, Attacking and killing Iran's supreme leader is a serious violation of Iran's sovereignty and security, and tramples on the purpose and principles of the UN Charter and the basic norms of international relations. China firmly opposes and strongly condemns this. These two sentences sound tough, but in the context of the time, it was a very limited statement. China didn't name the U.S. or Israel. They said the act of attacking and killing itself violated international law, but didn't say who did it, who was responsible, or who should pay the price. In diplomacy, this is called a principled expression. It emphasizes sovereignty and opposes force, but deliberately avoids saying who did it. It shows a political posture without giving any specific action. Did China announce any specific actions? Nothing. Do ambassadors recall? No U.S. or Israel diplomats were summoned, and no reciprocal measures were proposed. There was a detail in a subsequent press conference worth looking at. A reporter asked if reports that Iran and China were close to a deal for CM302 supersonic anti-ship missiles were true. Spokesperson Mao Ning answered that the reports were not true. Another reporter asked if Iran requested military support from China and Russia, would China consider it? Mao Ning didn't answer directly, instead talking about the role of the UN Security Council and multilateral diplomacy. Put these together, and it's a clear signal. China will not openly side with Iran in this war. Meanwhile, the foreign ministry and the embassy in Iran started evacuating citizens. By March 2nd, over 3,000 Chinese citizens had left. Later, Foreign Minister Wang Yi spoke with Iranian foreign minister, but the first thing he said was respect the reasonable concerns of neighboring countries, meaning you need to think about how the countries around you feel. Don't let this get out of hand. When Mao Ning recounted Wang Yi's statement, she said China urged all parties to stop military actions and prevent the flames of war from spreading further. Note the wording here, urged all parties, not urging the US to stop the strikes, but including Iran, which was launching retaliatory attacks. Everyone had to stop. This balanced expression puts the US, Israel actions, and Iran's response on the same level. If you were Iran hearing this, would you feel that China was standing in the same trench as you? Also, after the Strait of Hormuz was blockaded, many ships trying to pass were attacked. A huge number of cargo ships and tankers were stuck in the Persian Gulf. One-fifth of the world's oil supply goes through there. For China, this is a major energy artery being choked. China's response was, maintaining the security and stability of the region serves the common interest of the international community. China's urge for all parties to immediately stop military actions was a polite way of telling Iran to open the strait. Iran blockading the strait is a direct threat to China's energy supply. China didn't just withhold support, they used diplomatic language to demand Iran keep it open. There was a rumor online that Iran would only allow Chinese ships through the Strait of Hormuz to thank China for its stance. This rumor started in Indian media and was shared heavily on the Chinese internet with the sentiment that a Chinese passport gets you everywhere. The reality? The Iranian government never said that. On March 14th, Iranian foreign minister Ararchi made it clear that the strait was not closed and only restricted for ships from the US, Israel, and their allies. For other countries, ships could pass freely. This was Iran's official position, generally open, not a special favor for China. But just the day before, on March 13th, CNN cited a senior Iranian official saying Iran was considering letting some tankers through on the condition that cargo must be settled in Renminbi. This is Iran's two-faced approach, announcing it's open to everyone publicly but privately talking to China about the Renminbi conditions. This is still just being considered, it hasn't happened, and China hasn't responded. But what does this line of thinking show? In its most difficult moment of the war, Iran's idea was to turn China's currency tool into its own war leverage. They didn't consult China, they unilaterally grabbed the RMB to use as a lever. For China, the internationalization of the Renminbi is great, but Iran doing this is essentially drawing fire toward China. China wants the strait open and its energy secure. It doesn't want someone using the Renminbi flag to fight their own battle. Iran is using China, trying every way to pull China into the water, while China doesn't want to take the lead or be hijacked. So why is China reacting this way? There are three levels to why they aren't saving Iran. First level, they can't. China and Iran do not have a mutual defense treaty. The only country in the world China has that kind of treaty with is North Korea, which states that if one side is attacked, the other must provide full support. No other country has that agreement with China. Without the treaty, there is no legal obligation, and there are limits on capability. The Chinese military doesn't have the combat capability to project large-scale forces into the Middle East. Logistics, supplies, overseas bases, they just don't support that kind of long-range operation. Second level, they won't. China's core interests in the Middle East aren't in Iran. Saudi Arabia, the UAE, and Kuwait are the main sources of China's oil. Saving Iran would mean offending the entire Gulf at the same time. The math is simple. Plus, Iran isn't a reliable ally. Every time sanctions loosen, they go back to the West. Is it worth the risk of going to war with the U.S. for them? Third level, they don't dare. Any substantial military aid would trigger the strictest U.S. secondary sanctions, cutting China's financial system out of the dollar network. That price is much higher than losing the Iran card. More fundamentally, China's strategic center is East Asia, not the Middle East. The Taiwan issue is unresolved, and the main battlefield with the U.S. is East Asia. Fighting the U.S. directly in the Middle East for Iran would be fighting the wrong war in the wrong place at the wrong time, wasting limited strategic resource where it isn't worth it. In fact, the official ranking of the China-Iran relationship told us everything from the start. China's partnerships have three head levels. The top level is all-weather strategic partner. Only Pakistan has that. Below that is Russia, comprehensive strategic partnership of coordination for a new era. Below that is comprehensive strategic partner, which is where Iran sits, along with Italy, Spain, and Australia. The China-Iran relationship is not all-weather, it's not new era, and it has no military assistance clause. But that doesn't mean China does nothing. China has a method they've used for years, which they practiced during the Russia-Ukraine war, public denial, private support. Before the war, it was recorded that China sold drones and air defense systems to Iran. After the war started, U.S. intelligence said they monitored signs of China shipping drone parts and missile components to Iran. Meanwhile, Chinese warships appeared in the Arabian Sea to monitor U.S. carrier groups and provide satellite intelligence to Iran on U.S. deployments. This is called plausible deniability. Keep public neutrality while providing private support to keep the other side alive, but without exposing yourself to the risk of direct conflict. Beijing has gotten very good at this game. China's real stance isn't about saving Iran at all costs, nor is it about ignoring them completely. It's about keeping Iran from collapsing with the lowest possible cost. After all, a living, sanctioned Iran that depends on China is far more useful than a fallen one. And as long as the U.S. is stuck in the Middle East mud, they don't have the energy to fully deal with East Asia, which gives China more room to move on the Taiwan front. Post-Khamenei, Iran is entering an uncertain transition period. Mujitaba Khamenei was chosen as the new supreme leader on March 8. The new regime faces a harder time than ever. The leadership has been hollowed out, the revolutionary god Topras has been decimated, and the economy is collapsing under the war. What will the relationship with the new Iran look like? As long as the three big needs remain, cheap, discounted oil, the Renminbi settlement channel, and Iran is a bargaining chip against the U.S., the relationship won't break. However, the post-Khamenei regime is more fragile with fewer courts, and China's hand in this suspicious relationship has become much stronger. The Chinese internet loves the idea that Iran is China's most steadfast partner in the Middle East, that they stand together against U.S. hegemony as natural allies. Western media also loves to tell stories about the China-Iran axis of evil. After watching this video, you probably realize that's all nonsense. If I had to define the relationship, it's this. China is Iran's eternal backup, and Iran is China's eternal discount supplier. Both sides know it, but neither will say it out loud. That's not friendship, it's mutual benefit. Every time they get closer, there is a price tag, and every time they move apart, there is a price tag. They aren't together because of shared values or perfectly aligned interests or true strategic trust. They are together because they are both, to some degree, excluded from the existing international order and need someone willing to do business. This is the real color of this relationship. If you had to use two words, it's a plastic relationship. And as we said, China's most important partner in the Middle East has never been Iran. It's Iran's rival. China's trade with Saudi Arabia is eight times that of Iran. That's where the real money is. As for Iran's anti-U.S. alliance, it's just a fragile diplomatic narrative. In international politics, there is a saying, no eternal friends, no eternal enemies, only eternal interests. It's been quoted so many times it's almost a cliche, but it stays around because it's true. The China-Iran relationship is the cleanest footnote to that sentence. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my videos to others. I'll be back with more content soon. Until then, be well.