How China protected itself from the energy impacts of the war in Iran

Translated by. Chiara Lamedica 

If we had taken a closer look at the energy mix of the People’s Republic of China in 2025, the picture would have been as fascinating as it was paradoxical: a country burning more coal than all the other countries in the world combined, while at the same time emerging as one of the world’s most resilient energy powers. As is often the case when it comes to China, that resilience was no accident, but the result of a structured strategy built around four fundamental principles: near-total control over the refining of critical minerals such as gallium, graphite, and lithium; unparalleled investment in renewable energy; a cutting-edge ultra-high-voltage power grid capable of transmitting electricity from the sparsely populated west to the industrialized eastern coast; and coal itself, retained as a vital strategic resource in line with President Xi Jinping’s dictum to “build first, then dismantle” (先立后破, xiān lì hòu pò). The system’s vulnerabilities were no less evident: roughly three-quarters of China’s crude oil supply was imported, with most of it passing through the Strait of Hormuz, while demand showed no signs of stabilizing. The entire system thus represented an almost ironic yin-yang duality: the sheer power and reliability of coal balanced against the fragility of China’s green ambitions, with each element capable of both constraining and reinforcing the other.

That framework has now been confronted with its toughest practical test since “energy security” entered China’s political lexicon in the 1990s.

At the beginning of August, more than five months into the war in Iran, the Strait of Hormuz remains effectively closed to normal commercial traffic, with vessel transits representing only a tiny fraction of the daily crossings recorded before the conflict. For a strategic chokepoint that normally handles a quarter of the world’s seaborne oil trade, the disruption ranks among the most severe energy shocks of the past several decades.

For China, the exposure appeared particularly acute on paper. The country was both the world’s largest crude oil importer and Iran’s largest customer, with 90% of Iranian oil exports destined for Beijing, often through alternative channels designed to circumvent sanctions. The war and the subsequent wave of U.S. sanctions, which have targeted more than forty vessels, shipping companies, and at least one Chinese refinery, have severely strained the China-Iran relationship. Bilateral trade collapsed to a fraction of its previous value within just a few weeks, while Chinese exports to Iran fell by roughly 90% in the first quarter of 2026 alone. The People’s Republic of China responded with a confrontational stance, seeking legal injunctions to shield Chinese refineries from U.S. sanctions.

Yet China’s vast energy system has absorbed the shock better than most analysts had anticipated, and far better than many of its neighbors. To date, four main factors appear to have underpinned this resilience: substantial stocks of crude oil and refined products, extensive oil-processing capacity, comparatively low domestic inflation, and, above all, the continued electrification of transport and industry, which has prevented oil demand from tracking GDP growth as linearly as it did in the past. Indeed, Chinese crude oil imports are estimated to have fallen by roughly half since the beginning of the war, and this is probably the key reason why global oil prices have so far remained well below the $200-per-barrel level that analysts had feared. Beijing has largely refrained from scrambling to replace the oil lost as a result of the crisis, instead maintaining a strategy of reducing purchases during price spikes and then buying during downturns as soon as prices stabilized, drawing on a strategic reserve estimated to provide between two and three months of supply coverage. The lost Iranian volumes have been replaced by increased flows from Russia, Saudi Arabia, and Iraq, albeit at prices higher than those Chinese refineries had previously been accustomed to paying.

Russia’s role as a backup supplier has therefore grown, but Chinese officials appear cautious about becoming overly reliant on it. In particular, President Putin’s visit to Beijing during the crisis did not result in any announcement regarding the long-discussed Power of Siberia 2 gas pipeline. This silence has been interpreted as a sign that China would rather eliminate its dependence on imports altogether than simply relocate it. This is not a hastily improvised response born out of the conflict, but part of a decade-long strategy aimed at making the country increasingly self-reliant and less vulnerable to crises beyond its borders.

What the war has certainly confirmed is the wisdom of the course Beijing had already set. The new 15th Five-Year Plan, covering 2026–2030 and unveiled just weeks before the conflict began, formally adopted the goal of building an “energy powerhouse” (能源强国, néngyuán qiángguó). Although the phrase may appear to be little more than a synonym, it represents a deliberate step beyond the previous ambition of simply becoming a “major energy nation” (能源大国, néngyuán dàguó). The plan raised China’s 2030 renewable-energy target to 3,500 GW of installed capacity, more than double the 1,200 GW target that China had already achieved six years ahead of schedule. At the same time, it softened its language on coal, calling for the “promotion of a peak” in coal consumption rather than committing to an outright decline. In other words, coal is not being abandoned as a source of energy security; it is being retained precisely where the original logic of “build first, then dismantle” had placed it.

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