[China] Impose sanctions — IRAN

Summary

On April 14, an economic relationship severance event occurred between China and Iran, reported by 5 media outlets with a tension index of -7, indicating a severe level of economic separation. The sharp cooling of trade and investment relations between the two countries is expected to bring significant changes to global energy and raw material supply chains.

Supply-chain impact

• Energy supply chain: Potential halt of Chinese imports of Iranian crude oil increases the need for energy supply diversification in the Asian region
• Chemical & petrochemical: Iran's cutoff of petrochemical product exports to China makes reorganization of chemical raw material sourcing within China inevitable
• Metals & minerals: Suspension of non-ferrous metal trade including copper and zinc between the two countries pressures Chinese manufacturers to secure alternative supply sources
• Infrastructure projects: Risk of delays or suspension of Iran-related construction and infrastructure projects within the Belt and Road Initiative
• Payment & logistics: Need for readjustment of trade payment systems and maritime shipping routes between the two countries

Watch points

• Changes in China's Iranian crude oil import volumes and trends in transaction volumes with alternative suppliers (Russia, Saudi Arabia)
• Whether both governments issue official statements and economic sanctions measures, and their specific scope of application
• Changes in traffic volume through Middle Eastern maritime shipping routes including the Strait of Hormuz and fluctuations in freight rate levels