Why Have China and Russia Just Stepped Out of the Shadows in the U.S.-Iran War?

Yves here. Readers will know that we regularly use extreme neocon Simon Watkins’ fulminating as reader critical thinking exercises. His latest hyperventilation does not disappoint. I trust the commentariat will have fun picking apart what Watkins presents as facts and logic in trying to demonize Iran for having the temerity to Do Something to support Iran…when it was the US and Israel that destabilized the region and the world economy by launching an illegal war.

One illustration: Watkins carries on about the claim that China is supplying Iran with 400 manpads. First, these are defensive weapons. So what exactly is the problem? Second, Iran has cleared its throat and said the manpads are not gifts, Iran is buying them.

By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. Originally published at OilPrice

Russia and China are reportedly expanding support for Iran, providing intelligence, satellite navigation, and advanced weaponry.
The conflict is putting growing pressure on global energy security by threatening key export routes, including the Strait of Hormuz and Bab el-Mandeb.
China could ultimately emerge as the main geopolitical beneficiary by leveraging its influence over Iran to shape future peace negotiations and expand its regional influence.

As with all wars, particularly in the world’s main oil and gas repository of the Middle East, the U.S./Israel-Iran conflict has long threatened to widen out to include other interested parties aside from the main protagonists. The involvement of Washington’s and Tel Aviv’s allies so far has been limited to intelligence sharing and strictly defensive air support, rather than participating in offensive bombardments. For Tehran and its proxies, support from its key longtime sponsors China and Russia has been largely focused on diplomatic cover and economic lifelines, together with some deniable hardware for the war being supplied to Iran by Russia and China, including microelectronics and materials required to manufacture missiles and drones. All this helped keep the global oil markets under the ‘total panic point’ that might otherwise have been expected from such a conflict. However, dangerous new developments indicate that this covert war involving Russia and China might be stepping out of the shadows and into plain sight.

In Russia’s case, U.S. intelligence reports now indicate that Moscow is actively providing real-time satellite feeds and intelligence tracking on U.S. targets to Iran. This data on American warships and aircraft movements has enabled Iran to conduct far more precise retaliatory missile strikes. Moscow has also integrated its GLONASS satellite navigation system into Iranian drones, according to the same sources, allowing Tehran’s long-range projectiles to bypass allied electronic jamming more effectively. Widening out the loop even further, Iran’s newest drones and missiles also benefit from being able to track Chinese BeiDou-3 systems at the same time as Russia’s GLONASS. By merging Russia’s Ukraine-era upgrades with China’s tech, standard Western jamming systems cannot block both at once, as each system operates on entirely different radio frequencies. This gives the new drones that Iran is using against the U.S. unprecedented precision against its bases, as well as those of its allies.

In China’s case, news emerged last week from various intelligence sources that Iran is acquiring up to 400 Chinese-made Man-Portable Air-Defence Systems (MANPADS). These are highly accurate against helicopters, drones, and low-flying jets, utilising sensitive infrared and ultraviolet seekers that lock directly onto the heat signature of an aircraft’s engine, and are immune to countermeasures. They are also easy to deploy, weighing only between 15 and 20 kilograms, and basic operational training for a MANPADS launcher can be completed in less than a week. They are also impossible to locate, emitting zero electronic signature while tracking. In short, they aim to try to deny the U.S. low-altitude air superiority.

As effective as these pieces of kit are, they become even more potent in the broader geopolitical context that China (and Russia) want to halt what had been, until the Iran War, a successful push by President Donald Trump to reassert U.S. influence across the Middle East. The foundation stone for this was to have been the rolling out of further ‘relationship normalisation’ deals (‘Abraham Accords’) between Israel and other Middle Eastern countries, brokered by Washington, as analysed in full in my latest book on the new global oil market order. The UAE had been the first major Middle Eastern signatory to such a deal back in 2020, and Trump had been confident that he had shifted the backdrop across the region sufficiently to pave the way for several new deals. His bullishness was based on the U.S./U.K.-led removal of the Bashar al-Assad regime in Syria in December 2024, which removed Russia’s key Middle Eastern power hub at a stroke, a massive surge of U.S. investment in Iraq that saw multiple new oil and gas projects awarded to American firms rather than Chinese ones, as had been the previous trend. And Trump had ensured major new investment for Saudi Arabia too, while all the time tightening the sanctions noose around its principal regional nemesis, Iran.

Had Trump continued along this tack, the final obstacle to his vision of the Middle East returning to the U.S.’s sphere of influence, and away from that of China and Russia, may well have been realised. However, with direct attacks on Iran, he opened a Pandora’s Box, with the first problem flying out of it being Iran’s predictable closure of the Strait of Hormuz, through which flows up to 30% of the globe’s oil and around 10% of its liquefied natural gas (LNG). Worse still, is that the Iran-backed Houthis could widen their current blockade of Saudi Arabian ports and ships sailing through the Bab-el-Mandeb Strait any time they wanted to. This would lock out another 12% of the world’s crude oil flows and 8% of its LNG from the global supply chain. Added to this economic disaster for the Middle East’s energy suppliers is the daily threat from Iranian drones and missiles that target their key energy installations and vital infrastructure related to their other financial mainstay, the tourist sector. The geopolitical fallout here for the U.S. is no less catastrophic, as many of these countries are now questioning their rationale for buying hundreds of billions of dollars’ worth of U.S. defence equipment and relying on Washington as their protector against Iran.

It is not at all accidental that both problems could be solved very quickly — by China. As first revealed anywhere in the world in my 3 September 2019 article and analysed in full in my latest book on the new global oil market order, under the full terms of the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, China controls much of Iran’s oil and gas resources. The deal crucially also gives Beijing enormous power over the vital oil and LNG transit routes of the Strait of Hormuz and the Bab el-Mandeb Strait. This 16-mile-wide waterway flows between the west coast of Yemen on the one side, and the east coasts initially of Djibouti and then of Eritrea on the other, before it joins the Red Sea. The 25-year deal with Iran not only gives Beijing power over all Iran’s proxies, including the Yemeni Houthis, but China also holds huge sway over Djibouti and Eritrea through predatory loans-for-infrastructure deals given to them under its ‘Belt and Road Initiative’ programme. Put simply, China could directly affect Iran’s willingness to keep the Strait of Hormuz blockaded, and the Houthis’ appetite to do the same for the Bab el-Mandeb Strait, by simply telling Tehran to stop, and, if necessary, adding that it would halt all imports of its oil if it did not. China remains Iran’s biggest buyer of oil and Chinese ships still enjoy safe passage through both Straits. Moreover, Chinese-flagged and Chinese-operated supertankers (such as the Cosnew Lake and Xin Long Yang) have also been allowed by the Houthis to freely carry millions of barrels of Saudi and Emirati crude directly through the Bab el-Mandeb Strait without a single scratch.

When it comes to a direct military confrontation with the U.S., China knows it is outmatched, and in any event this is rarely the Chinese way. As laid out in The Art of War by China’s great fifth-century military strategist Sun Tzu, ‘the supreme art of war is to subdue the enemy without fighting’. This seems to be exactly the approach China is taking in the context of the current events in the Middle East. Beijing is allowing the U.S. to deplete its resources of missiles and other crucial war materiel in fighting an unwinnable hot war, while it quietly wins the strategic peace. The strategy also places China in an ideal position to broker a peace between Washington and Tehran when the situation becomes truly untenable for Trump, perhaps with a view to winning an understanding that the U.S. in return might take a softer view on future Chinese actions over Taiwan’s sovereign status. Russia may also hope to leverage its own influence on Iran to secure a peace deal with the U.S. In exchange, Moscow would likely expect Trump to push for a matching settlement in Ukraine — one that offers a better agreement than Russia could otherwise achieve — although this approach seems less likely to succeed than Beijing’s gambit. Meanwhile, the U.S. has signalled its own willingness to confront any further widening of the war, at least regionally. For the first time, the U.S. publicly partnered with Saudi Arabia in military strikes carried out on 28-29 July, targeting Iran-backed Popular Mobilisation Forces militia groups in Iraq. This followed an historic long-range drone strike by Ukraine on 25 July in the Caspian Sea against ships moving from Iran to Russia. Those vessels were believed to be carrying Iranian Shahed drone components and ballistic missiles destined for Moscow’s war effort against Kyiv. A Washington-based security source exclusively told OilPrice.com last week that, aside from reducing weapons deliveries, the Caspian strike signalled that the U.S. can rely on Ukraine as a vital partner in various aspects of its broader fight against Iran.