The financial architecture sustaining the Islamic Republic runs, in substantial part, through Beijing. According to an estimate by the U.S.-China Economic and Security Review Commission—a body created by Congress to assess bilateral strategic risk—Chinese purchases of Iranian oil reached $31.5 billion in 2025, a figure that accounted for approximately 45 percent of Iran’s entire government budget.

"Chinese [oil] purchases equaled $31.5 billion in 2025, and accounted for 45 percent of Iran's government budget, the U.S.-China Economic and Security Review Commission, created by Congress, estimated last month."
-@PatcohenNYT, @nytimes https://t.co/g27zJpfWrK

The United States has moved to disrupt Iran’s illicit oil trade, sanctioning a China-based petroleum terminal operator, Iranian currency exchange houses, and associated networks in a coordinated State and Treasury action announced May 1, 2026.

The primary target is Qingdao Haiye Oil Terminal Co., Ltd., a Chinese terminal operator that has imported tens of millions of barrels of sanctioned Iranian crude oil since the announcement of National Security Presidential Memorandum 2 (NSPM-2). Haiye allegedly accepted cargo from vessels conducting ship-to-ship transfers with already-sanctioned ships, enabling billions of dollars to flow to Tehran through layered evasion schemes. The deceptive shipping practices involved also posed risks to legitimate maritime commerce.

The threat to close the Strait of Hormuz is the oldest line in Iranian deterrence. It has been recited since the Iran-Iraq War, repackaged after every sanctions tightening, and trotted out reflexively whenever a US carrier strike group enters the Gulf. The line works because the audience accepts the premise: that Iran could close the Strait if it wanted to. The premise is half true. Iran has the capability to disrupt traffic for days, possibly weeks. What it does not have is the capability to survive doing so.

The Strait of Hormuz is irreplaceable for Iran. It is increasingly optional for everyone else. Two decades of Gulf state infrastructure investment have built a parallel export system that bypasses the corridor entirely, and the trend is accelerating. The strategic implication is that Iran’s chokepoint leverage is depreciating in real time.

Saudi Arabia’s East-West pipeline, the Petroline, runs from Abqaiq to Yanbu on the Red Sea. Capacity has been expanded incrementally and now sits near five million barrels per day. In a Hormuz disruption scenario, the Saudis can route the bulk of their crude to a Red Sea terminal that exits via Bab el-Mandeb, a strait the Houthis can harass but the kingdom can defend more easily than a Gulf corridor ringed by Iranian territory. Yanbu is not a perfect substitute. It is a serviceable one.