Oil and the Iran-Saudi Accord: Why China Brokered the Deal

Six months ago, Ali Khameini’s theocratic regime looked to be on the ropes. Young protesters swarmed the streets. Saudi Arabia and other Sunni Muslim neighbors were inching toward an alliance with Israel, threatening Shia Iran with a security vise.

Tehran holds a trump card, though, in the armed proxies it supports across the Middle East. Key to the current situation are the Houthi “rebels” in Yemen, who have bested the Saudi-backed government in an eight-year civil war. They have also hit the Saudi homeland with drone attacks on oil refineries and other infrastructure.

Saudi leader Mohammed bin Salman seems to have had enough. “The Saudis need to get out of Yemen, and the U.S. hasn’t been able to help them,” says Steven Cook, senior fellow for Middle East Studies at the Council on Foreign Relations.

China could mediate with Iran in a way the implacably hostile U.S. couldn’t. More concretely, Beijing’s involvement signals that it will keep buying Iranian oil in defiance of U.S. sanctions.

Iran is exporting more than one million barrels a day, most of it China-bound by covert channels, estimates Hunter Kornfeind, an oil market analyst at Rapidan Energy Group. That’s less than the two million barrels it shipped before Donald Trump’s 2018 “maximum pressure” campaign, but 50% more than it was selling a year ago. And plenty enough to keep Khameini’s clerical elite and security forces well funded.

China is also the Saudis’ biggest oil customer, buying twice as much crude as the U.S. So its presence at the Middle East table is hardly shocking.

Riyadh and Tehran are still far from singing Kumbaya. The Houthis, who control Yemen’s capital and most of the population, have to agree to settle for that. “The Iranians have greater ability to spin up the Houthis than to spin them down,” says Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies.

But even a cold peace with the Saudi Kingdom could complicate the already complicated calculus around Iran’s (presumed) march toward nuclear weapons. A U.S. bid to revive a 2015 no-nukes-for-no-sanctions accord stalled last autumn when Khameini’s people balked at Western nations’ inspection demands.

Consultant Rapidan still gives a new pact 25% chance of success. Meanwhile, both sides are in a glacially-paced game of chicken. Iran keeps enriching uranium toward weapons-grade levels, while the U.S. and Israel promise they will never allow actual deployment. “Iran’s is arguably the slowest nuclear program in history,” Washington Institute’s Henderson comments.

Hard-nosed geopolitical analysis shouldn’t negate the potential blessing of peace in Yemen. The war there has killed nearly 400,000 people, the United Nations estimates, most of them civilians felled by famine or disease.

But de facto victory for Iran shows the Islamic Republic endures in its fifth decade, and may become a front-page headache again soon.