AUGUST 28 — The inability of President Donald Trump to achieve a durable breakthrough with Iran is no longer merely a Middle Eastern problem.
It is beginning to bleed directly into the already complicated relationship between the United States and China.
The warning from Beijing this week should therefore be taken seriously.
China has indicated that it could retaliate if Washington significantly expands secondary sanctions against Chinese companies doing business with Iran.
Beijing insists that its commercial relations with Tehran are legitimate and has promised to take necessary measures to protect Chinese companies and interests.
This creates an increasingly dangerous chain reaction.
The United States has been unable to compel Iran towards a settlement on Washington’s preferred terms.
The Trump administration is consequently turning increasingly towards economic coercion.
US Treasury Secretary Scott Bessent announced an expansion of the activities potentially subject to secondary sanctions across several sectors, while warning countries maintaining commercial relations with Iran that they could eventually face exclusion from the dollar-centred financial system.
Yet secondary sanctions are fundamentally different from sanctions directed solely at Iran.
They internationalise the confrontation.
Washington is effectively telling third countries that access to the American financial system may depend upon their willingness to observe American restrictions against Tehran.
The difficulty is obvious when the third country concerned is China.
China is not merely another Iranian trading partner. It is the world’s second-largest economy, America’s principal strategic competitor and an enormous consumer of Iranian energy.
The Financial Times reports that China takes around 90 per cent of Iranian oil exports, although much of this trade involves smaller private refiners rather than China’s largest state-owned companies.
Consequently, an attempt to economically suffocate Iran inevitably runs into China.
This is where Trump’s Iran strategy risks creating consequences far beyond Tehran.
Washington and Beijing already have substantial disagreements involving tariffs, technology, semiconductors, Taiwan, the South China Sea, industrial policy and critical minerals.
Adding Iran-related secondary sanctions against major Chinese companies or financial institutions could create another arena for retaliation.
Indeed, the timing is particularly delicate. Trump and Chinese President Xi Jinping are expected to meet within weeks as both governments attempt to manage their broader economic relationship.
Iran could therefore become an unwanted spoiler in Sino-US diplomacy.
There is an even deeper strategic problem.
Secondary sanctions are powerful precisely because the dollar remains at the centre of international finance. Countries and companies comply because losing access to American banks, markets and clearing systems can be commercially devastating.
But the more frequently Washington threatens to weaponise this advantage against major powers, the greater the incentive for those powers to develop mechanisms that reduce their exposure to it.
China has already spent years expanding renminbi settlement, alternative payment arrangements and other financial mechanisms capable of reducing dependence on dollar transactions.
The process should not be exaggerated. The dollar remains overwhelmingly important.
Nevertheless, sanctions can accelerate precisely the behaviour Washington wants to prevent.
The Trump administration therefore confronts a paradox.
It wants to isolate Iran economically. But achieving comprehensive isolation requires pressuring Iran’s trading partners.
Pressure against small economies may succeed relatively easily. Pressure against China can trigger retaliation.
Beijing has demonstrated repeatedly that it possesses economic instruments of its own, including considerable leverage over critical minerals and industrial supply chains.
Thus an American campaign designed to weaken Tehran could inadvertently produce another round of Sino-American economic confrontation.
This would be strategically counterproductive.
The central weakness remains the absence of sufficient diplomatic progress with Iran.
Trump said on August 27 that Washington was not currently negotiating with Tehran, while his administration continues intensifying its economic campaign.
Qatar, meanwhile, has been attempting to revive diplomatic engagement.
Meanwhile, the Strait of Hormuz remains a major source of international economic vulnerability.
Iranian officials have attached conditions to reopening the waterway, through which roughly one-fifth of global oil and LNG shipments passed before the February conflict.
Oman continues trying to establish arrangements capable of restoring shipping.
This makes diplomacy more urgent, not less.
China also has powerful reasons to want stability. It depends heavily on imported energy and therefore has little interest in prolonged disruption across the Persian Gulf.
That creates an opportunity.
Instead of allowing Iran to become another battleground between Washington and Beijing, both powers should recognise their overlapping interest in preventing further escalation, reopening maritime commerce and stabilising energy markets.
China cannot dictate Iranian behaviour. Neither can Washington simply sanction its way towards every desired political outcome.
But Beijing possesses economic leverage over Tehran that few other governments possess.
Trump should therefore consider whether China is more useful as part of the diplomatic solution than as another target of America’s Iran sanctions campaign.
The strategic choice is increasingly stark.
If Washington cannot transform military and economic pressure into diplomacy, the Iran confrontation will continue spilling beyond Iran.
First into the Persian Gulf.
Then into global energy markets.
And increasingly into Sino-US relations.
That would transform an already difficult Middle Eastern crisis into another structural confrontation between the world’s two largest economies.
Iran is difficult enough.
Washington should be careful not to turn the failure to resolve one geopolitical confrontation into the beginning of another.
* Phar Kim Beng is professor of Asean Studies, and director at the Institute of International and Asean Studies, International Islamic University Malaysia.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
