Behind China’s ‘active efforts’ for an Iran ceasefire: Business trumps politics

BEIJING — China’s ties with countries such as Iran and Russia have raised expectations of a bigger diplomatic role, but Beijing remains focused on protecting its own domestic interests, including global exports.

That stance underpins Beijing’s circumspect acknowledgment of reports that it pushed Iran toward this week’s temporary ceasefire. A New York Times report cited three Iranian officials as saying China played a role, while AFP cited U.S. President Donald Trump.

China has made “active efforts” to end the conflict, Foreign Ministry Spokesperson Mao Ning said Wednesday, when asked by the press about the reports. She emphasized that Foreign Minister Wang Yi had made 26 phone calls to representatives of countries including Russia, Saudi Arabia, Germany and Iran since the U.S.-Israel strikes on Iran began on Feb. 28.

But Beijing stopped short of confirming direct mediation.

China called for an “immediate stop” to military operations after U.S.-Israel strikes against Iran in late February. When asked on March 3 about Iran’s counterattacks, China’s Foreign Ministry did not mention Tehran specifically, urging instead for “all parties” to prevent the conflict from spreading.

“What Beijing did is not really about direct intermediation,” said Zongyuan Zoe Liu, a senior fellow for China studies at the Council on Foreign Relations.

“What Beijing did is, more precisely, broker[ed], facilitated the ceasefire,” she said Friday on CNBC’s “The China Connection. “From that perspective there’s nothing [that has] changed with regards to Beijing’s foreign policy. It does not mean Beijing is becoming more active.”

Instead, she noted Beijing is concerned about the risk of a global downturn from the war that would hurt its export-oriented economy.

Net exports contributed to about one-third of China’s GDP last year, despite heightened U.S. tariffs, leaving its economy exposed to disruptions in global trade.

IMF Managing Director Kristalina Georgieva warned Thursday that global growth would slow even if the ceasefire holds, citing lingering uncertainty around the Strait of Hormuz.

The strait handles about one-fifth of global oil supply, connecting the Persian Gulf on the coast of Saudi Arabia with the rest of the world. While China is the primary buyer of Iranian oil and relies on the waterway for just under half of its seaborne oil imports, that represents just 6.6% of China’s total energy consumption.

Still, China faces “immense pressure due to rapidly rising energy costs, and hopes the Strait of Hormuz will be reopened soon,” said Hai Zhao, a director of international political studies at the Chinese Academy of Social Sciences, a state-affiliated think tank.

As of January, Beijing held enough crude stockpiles to meet demand for three to four months, according to estimates. Data show that Iran has been sending oil through the strait to China since the war began.

However, gasoline prices in China jumped 11% in March from the prior month, and authorities have raised the official domestic gasoline prices twice in six weeks, by a total of 1,580 yuan per metric ton, or about 60 cents per U.S. gallon. The average price in the U.S. has gone up by more than $1 per gallon during that time.

Higher energy costs are also squeezing factory margins, adding to price pressures across China’s manufacturing sector.

Globally traded Brent crude futures remained below $100 a barrel on Friday, despite limited signs of a recovery in shipping through the Strait of Hormuz. Recent Iran attacks on a crucial Saudi pipeline have also slashed the kingdom’s oil output, Saudi Arabia’s state news agency said Thursday.

China’s diplomatic positioning builds on its role in restoring diplomatic ties between Iran and Saudi Arabia three years ago, ending three decades of animosity. The move was notable given U.S. interests in the Middle East, while elevating China’s profile in the region.

That history means Beijing can play the role of mediator once both sides are willing to reduce conflict, Zhao said.

But he noted that China lacks the capability or inclination to pressure either side into negotiating. Instead, China’s support gives Pakistan’s mediation efforts more heft, he said.

Pakistan, which shares borders with China and Iran, is set to host Iranian and U.S. leaders in Islamabad this weekend for ceasefire talks. The extent of Beijing’s involvement with the summit remains unclear.

“We support the mediation efforts by countries including Pakistan,” Chinese Foreign Ministry Spokesperson Mao said this week. She noted Beijing has called on all parties to end hostilities as soon as possible, for regional peace. “China has made active effort to this end.”

In late March, China and Pakistan published a plan for “restoring peace and stability” in the Middle East, including a ceasefire, peace talks and the restoration of normal passage of ships through the Strait of Hormuz.

Pakistan abstained from voting on a UN Security Council resolution this week that would have encouraged countries to coordinate their defensive efforts in order to reopen the strait. Veto-wielding Security Council members China and Russia objected and planned to issue an alternative resolution.

Iran has made clear that ships must obtain its permission to pass through the strait, Sultan Ahmed Al Jaber, CEO of Abu Dhabi National Oil Co., said Thursday in a social media post. “The Strait of Hormuz is not open. Access is being restricted, conditioned and controlled.”

Before the war, Iran had occasionally harassed, attacked or seized vessels transiting the strait as tensions with the U.S. escalated.

“China welcomes any chance to present itself as a constructive, responsible power while the Trump administration is seen as the source of the instability,” CFR’s Liu said.

But she warned that the broader geopolitical dynamics remain unchanged.

“The underlying structural tension between Beijing’s dependence on a rules-based global order and Washington’s growing willingness to disrupt that order remains entirely unresolved,” she said.

“That is the story worth tracking beyond the immediate ceasefire.”

— CNBC’s Asriel Chua contributed to this report.