China-Iran relations showing strains

Wang Yi reaffirms China-Russia ties at NPC press conference

This update focuses on oil market developments, especially pertaining to China. Iran’s targeting of Omani crude oil will upset China. Significantly, it suggests that an increasingly desperate Khamenei regime judges that the risks of angering Iran’s most important economic partner are outweighed the need to inflict pain on the United States and its Arab partners.

The conflict has moved beyond its initial phase

The war is increasingly one of attrition and a test of patience. The broad consensus among oil and Iran analysts is that this war will last weeks, perhaps longer. I again recommend Afshon Ostovar’s podcast, which hosted the oil/Iran analyst Gregory Brew. Nate Swanson, meanwhile, writes that “a slow, protracted, war of attrition is probably Iran’s intended outcome.” I’d add that the scale of the U.S. Strategic Petroleum Reserve (SPR) release (172 million barrels, at an average rate of 1.43 million barrels per day) suggests that the Trump administration anticipates a conflict will last at least several more weeks. Oil markets seem to agree, as prices are rising higher tonight, as of this writing. Although the goals of the war remain highly unclear, a large-scale SPR release suggests that the Trump and/or Netanyahu administrations are at least contemplating the deployment of significant ground forces into Iran, perhaps to destroy portions of the nuclear weapons program.

Drones continue to pressure coalition air defenses. Worryingly, interception rates for drone attacks have decreased, according to UAE data. The UAE Ministry of Defense did not update the data today. On drones, this analysis for Foreign Affairs by Michael C. Horowitz and Lauren A. Kahn is worth a read, especially as it dives into an Indo-Pacific contingency.

Iranian Drone Attacks on UAE

Source: UAE Ministry of Defense, Kevin Li’s calculations

Iran is hitting Chinese infrastructure and China-bound oil shipments. Beijing is not pleased.

There are growing tensions between China, the world’s largest energy importer and Iran, which is constricting world oil supply by threatening tankers transiting the Strait of Hormuz.

Iran struck Oman today at the Port of Salalah, setting ablaze storage tankers. While not necessarily aimed at provoking Beijing, it will certainly be noticed in China. As about 90 percent of Oman’s crude is typically shipped to China, Iran’s attack on Salalah is, essentially, setting Chinese oil supply on fire.

In addition, Ali Ardashir Larijani, Secretary of the Supreme National Security Council of Iran, tweeted in English, Arabic, French, Russian, Farsi, and, pointedly, Chinese that “The Strait of Hormuz is either a ‘strait of open opportunities’ for all, or a dead-end strait for warmongers.” The remnants of the Khamenei regime are clearly contemplating mining the Strait of Hormuz, as Iranian forces have reportedly laid about a dozen mines. Since Iranian forces have access to thousands of mines, and ample delivery craft, the deployment of only a small number of mines is likely a threat from the Khamenei regime that it will continue moving up the escalation ladder. For background on naval mining, including in the Strait of Hormuz, I highly recommend the CRR’s interview with Dr. Scott Savitz of RAND.

While Beijing may act opportunistically and provide Iran with some kind of intelligence or indirect military support (such as shipment of dual-use components), it is not going to intervene on Iran’s side. Beijing is not only unhappy with Iran’s blockade of the Strait and targeting of Omani oil infrastructure, but its economic, energy, financial, and even military ties with the Arab countries are far deeper than with Iran. Tellingly, China (and Russia) didn’t veto a Bahraini resolution at the United Nations Security Council that condemned Iranian aggression.

But Beijing is still receiving Iranian crude oil

Beijing has already shied away from supporting Tehran, including by skipping trilateral naval exercises just before the conflict. Nevertheless, it will continue to engage opportunistically with Iran by importing oil. According to CNBC, Iran shipped nearly 12 million barrels of oil to China since the conflict began. Significantly, these shipments must cross the Strait of Hormuz.

Again, neither China nor Iran are economically incentivized to close the Strait, but the Khamenei regime seems to be edging towards deploying more mines, which would impose greater economic costs on the U.S. and the Arab states. If Iran does mine the Strait, Beijing may more vocally signal alignment with the Arab states.

Moscow couldn’t be happier

Higher oil and LNG prices benefit Moscow, all else being equal, as Russia is a major oil and gas exporter. I’ve seen some analysts overthink this. While it is true that Russia’s access to Shahed drones may decline, Moscow prefers that as much Gulf oil infrastructure as possible is damaged, which will drive up world energy prices – and Russian export earnings. Lastly, Wang Yi affirmed on the sidelines of the National People’s Congress that China-Russia relations remain “rock-solid,” or 风雨不动安如山. There has been some bilateral friction recently over Iran, but Wang’s comments suggest that Beijing and Moscow have reconciled their different perspectives and interests in the Middle East, at least for now.

Israeli strikes on Iranian electricity infrastructure could trigger a water catastrophe and severely damage ties with the U.S.

The coalition must protect Iranian civilians — many of whom, it should be noted, bravely protested against the regime not long ago. As coalition forces prosecute the war against Iran, they should reject targeting Iran’s water infrastructure across the natural gas-oil-electricity-water nexus. Earlier this week, there were worrisome signs that Israeli forces were contemplating instigating water shortages in Iran, which would constitute a disproportionate response to the real – but limited – threat from Iranian forces. Sparking a water crisis in Iran is a reckless course of action, and Israeli forces should cease any activities in this direction.

While the Israeli government seems to be, for now, backing off attacks against Iranian water infrastructure, earlier this week it seemed to be laying a predicate for further strikes. Strikes on Tehran’s oil infrastructure, and the resulting impacts on civilians in Iran, were alarming. Iran uses oil to supply about 8 percent of power generation and is already routinely short of electricity. Concerningly, any additional loss of electricity could prevent Iranians from using water pumping stations, accessing electric wells, or conducting basic hygiene via sewage treatment plants; the air strikes against the refinery also appeared to have contaminated Tehran’s sewage system. Furthermore, Israeli figures falsely claimed that the UAE targeted Iran’s water infrastructure, only to be met with furious denials from the UAE. Finally, some Israeli media outlets appear to be hinting that Iran’s natural gas power plants could be suitable targets, despite the present author explicitly warning several times in an interview that targeting Iran’s water-related infrastructure would be escalatory.

Electricity is a critical, life-sustaining sector in Iran. Indiscriminately bombing Iranian electricity infrastructure – especially natural gas power plants, which provide about 80 percent of Iran’s electricity – is not justified and would profoundly damage Israel’s long-term strategic interests.

The U.S. and Israel should be aware of the potential of a water crisis and do their utmost to prevent one by refraining from indiscriminately targeting Iran’s electricity generation infrastructure. A humanitarian crisis would inflame Iranians not against the regime, but against Israel and the United States, undermine the Iranian people’s ability to rebuild a stable post-regime state, and do lasting damage to Israeli and American interests in the Middle East and beyond.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and the Indo-Pacific Security Initiative; he also edits the independent China-Russia Report. Kevin Li, a Young Global Professional at the Global Energy Center, and Kate Burnett, also a Young Global Professional at the Global Energy Center, provided research assistance for this article. This analysis reflects Webster’s own personal opinion.

The China-Russia Report is an independent, nonpartisan newsletter covering political, economic, and security affairs within and between China and Russia. All articles, comments, op-eds, etc represent only the personal opinion of the author(s) and do not necessarily represent the position(s) of The China-Russia Report.