Protests have erupted across the country of Iran, leading to the deaths of tens of thousands of civilians due to the violent response of the government. As a result, President Trump has sent the USS Abraham Lincoln, serving as the flagship for Carrier Strike Group 3, with the threat of intervention if the violence and oppression do not stop. Additionally, with the ongoing threat of military intervention, a resolve demonstrated by the recent downing of an Iranian drone that was approaching the USS Abraham Lincoln, Iran has agreed to additional rounds of nuclear talks. The outcome of the first round of talks, which took place in Oman the weekend of February 5, did not seem promising.
Iran boasts one of the largest proven oil reserves in the world, and although heavily sanctioned, it remains a top 10 global producer and an active member of OPEC+. As a result of heavy sanctions, most of Iran’s oil has been purchased by China, which accounts for a significant portion of China’s annual seaborne oil imports. Given the recent political upheaval in Venezuela, if Iran has a similar fate, the combination of losing access to cheap Venezuelan and Iranian oil would devastate China’s seaborne imports.
Iran’s Oil and Vulnerability
In 2023, Iran held the world’s third-largest known oil reserves, accounting for 9% of the global total, and was the fourth-largest crude-oil producer in OPEC+. A significant portion of Iran’s oil infrastructure, especially its vital export terminals, is concentrated in the southwest, with onshore production centered in Khuzestan and offshore production along the country’s Persian Gulf coastline. The majority of Iran’s oil reserves, 86%, are located onshore in the Khuzestan Basin, which also accounts for 80% of the country’s total onshore reserves. The concentration of oil in one particular region is a convenience for extraction and transportation, but it may also prove to be a strategic vulnerability if the United States proceeds with military intervention and targets key resources and infrastructure. Of the plentiful oil infrastructure Iran has, arguably the most important is the Kharg Oil Terminal on Kharg Island. With 90% of Iran’s oil exports passing through Kharg, it remains one of the most critical components of Iran’s oil supply chain and, therefore, a glaring Achilles’ heel.
In addition to Kharg Island, the Strait of Hormuz is important to Iran and to the global oil supply. For decades, the Strait, situated between Iran and Oman, has remained one of the world’s most important trade routes, serving as a critical link between Middle Eastern oil and the global market. In 2024 alone, the Strait served as a passage for an average of 20 million b/d, equivalent to a staggering 20% of global consumption; the figure increased to over a quarter of all seaborne oil trade in 2024 and the first quarter of 2025.
Although more diversified than other oil-rich countries in the region, oil accounts for a significant and reliable portion of Iran’s GDP. In 2024, oil production accounted for 23% of Iran’s GDP, and oil exports accounted for 40% of the country’s total export revenue in 2023. Given the importance of oil revenue to the current government of Iran, a major supply chain disruption of any kind, which could include either the destruction of critical infrastructure or perhaps even an American occupation of Kharg Island, could contribute to the government of Iran losing control over an already frustrated citizenry.
Sanctions on Iran and China’s Exposure
The United States has levied sanctions on Iran for decades, beginning in 1979 with President Jimmy Carter’s Executive Order 12170, which froze Iranian assets in response to the seizure of the U.S. Embassy and kidnapping of its staff during the Islamic Revolution. Trade restrictions were expanded in 1984 after Iran was declared a state sponsor of terrorism, but it was in 1995 when Iran’s petroleum industry was specifically targeted. In 1995, President Bill Clinton signed Executive Order 12975, Prohibiting Certain Transactions With Respect to the Development of Iranian Petroleum Resources. Executive Order 12975 declared a national emergency, which has subsequently been renewed every year since, surrounding the growing national security threat that Iran posed, and prohibited any American citizens from being involved in any part of Iran’s petroleum industry. Many other sanctions exist that were either expanded or temporarily suspended since 1995; however, 2025 was a notable year of new sanctions intended to impose maximum pressure on Iran, with the most recent being signed on February 6, 2026, as listed below:
Select U.S. Sanctions on Iranian Petroleum 2025 – 2026
China and Iran’s relationship has been mutually beneficial, but much more so for China. Born out of strategic opportunism, the sanctions the United States has levied on Iran’s oil over the years have allowed China to purchase heavily discounted oil from the theocracy. China has been the largest buyer of both Iranian and Venezuelan oil, although tracking the actual import percentages is difficult given that the countries use a shadow fleet that often changes vessels and falsifies documentation. At the moment, China is Iran’s largest export market, which accounts for approximately 80% of all of its oil exports, and consequently, saves China between $8-10 per barrel. China’s imports of Venezuelan oil accounted for approximately 4.5% of its overall seaborne imports in 2025, while Iranian oil accounted for 13.4% of China’s seaborne imports in the same year. As a result of the ongoing sanctions, China has enjoyed purchasing discounted oil from heavily sanctioned countries, including Venezuela, Iran, and Russia, but the recent ousting of Maduro in Venezuela and the uncertainty of Iran’s political future may bring those savings to an end; this could also provide Russia with geopolitical leverage if both Venezuelan and Iranian crude are no longer made available to China.
Conclusion
The current political climate in Iran has put into question the longevity of the ruling theocracy. For decades, the oppressive government has used lucrative and reliable oil revenues to maintain its control of the resource-rich nation. However, the recent protests and the government’s violent response have led the United States to declare that it is prepared to intervene militarily if things don’t change. The response has led to a new round of ongoing nuclear talks, the first of which concluded the weekend of February 5, 2026, with more scheduled.
Ultimately, the current government of Iran is exploring all options of self-preservation, which, given its reliance on discounted oil imports, is also in China’s best interest. If there is permanent political change in Iran, that is, if the government established in 1979 is removed, China will lose another source of reliable, cheap oil. Although China may be able to replace Iranian seaborne crude, likely with Russian oil, it will lose an important level of import diversification, which would place it in a strategic disadvantage to the United States; given that China is regularly one of the largest importers of oil and the United States is now regularly the largest producer, the United States stands to gain an economic advantage if Iran no longer is a source of discounted oil for China.
