Navigating between business and realpolitik: China caught in the crossfire of Israel-Iran standoff

The evolving role of China in Middle Eastern politics

It seemed like China had finally managed to solve the puzzle of the Middle East.
The diplomatic mediation between Saudi Arabia and Iran, which took place a year ago thanks to Beijing’s discreet work, painted a bright future in a region traditionally plagued by wars and tensions of all sorts.

The intense dialogue with the Taliban in Afghanistan and the agreements sealed between Beijing and Riyadh (Chinese leader Xi Jinping had met with Saudi Crown Prince Mohammed bin Salman, striking dozens of high-level commercial deals) suggested that the Dragon, through an iron pragmatism, had somehow found a solution to an extremely complex situation.

However, the conflict between Israel and Hamas, in addition to the mutual attacks between Israel and Iran, are the two factors that have compromised China’s delicate balance.
Especially since the Dragon is an important trading partner of both Tel Aviv and Tehran.

Israel’s growing impatience

Let’s take a closer look at the Israel-China relationship.
According to data from the Israeli Central Bureau of Statistics (CBS), in 2023, the total trade between the two countries – excluding diamonds – amounted to $14.5 billion, approximately 18% less than the $17.6 billion recorded in 2022.
It’s worth noting that, on a country-to-country basis, the People’s Republic of China became Tel Aviv’s second most important export destination after the US in 2020.

In recent years, Tel Aviv and Beijing have signed infrastructure agreements totaling $5.91 billion.
Other agreements have focused on technology, transportation, the port sector, and the electrical industry, all signed by Chinese state-owned companies.
Notably, the two high-tech sectors where the Chinese have invested the most are software development and IT ($1.12 billion) and healthcare sciences ($1.35 billion).

“We hoped for a stronger condemnation and a clear recognition of Israel’s right to defend itself,” said Yuval Waks, the deputy head of the Israeli mission in China, referring to China’s approach to the events that have disrupted the Middle East.
With the close bilateral relations between China and Iran and the looming conflict between Tehran and Tel Aviv, it’s not surprising that Israel is starting to show impatience towards the Asian giant’s modus operandi.

The ties between Beijing and Tehran

This brings us to the economic relations between China and Iran.
In 2020, the two countries entered into a strategic partnership (signed on June 24, 2020, in Beijing) where the Chinese government pledged to invest $400 billion in the Iranian economy over 25 years in exchange for a steady (and heavily discounted) supply of oil from Tehran.

“China represents about a third of all Iranian trade and is a significant protector of Iranian interests in the [United Nations] Security Council.
It seems to me that China is the single country with the greatest capacity to influence Iran, if it wishes,” stated Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies.

Between 2020 and 2023, Chinese companies more than tripled their imports of Iranian oil, skyrocketing sales to the highest level in the last 10 years.
This, along with clear geopolitical reasons, is why China struggles to exert pressure on Tehran.
At the same time, the tensions in the Middle East do not bode well for business and are therefore not in Beijing’s best interest.
China is called to walk on an increasingly thin line as it navigates these challenges.