China’s Economic Stake in the Middle East: Its Thirst for Oil

China has cast itself as a neutral geopolitical player in the Middle East. It brokered a deal in March to help Iran and Saudi Arabia restore relations. And in the days since Hamas attacked Israel from Gaza, China has tried to keep its distance, with a government spokesman calling the country “a common friend of both Israel and Palestine.”

Yet China’s stakes in the Middle East are high, particularly if the war now being fought in Israel and Gaza were to broaden through the region.

One big reason: Oil.

No country buys more oil from Saudi Arabia, the world’s second largest producer behind the United States. Half of China’s oil imports, and a little more than a third of all the oil burned in China, comes from the Persian Gulf, according to Andon Pavlov, the lead refining and oil products analyst at Kpler, an analysis firm in Vienna.

China has also started buying more oil from Iran, a longtime backer of Hamas, the group behind the attack. China has more than tripled its imports of Iranian oil in the past two years and bought 87 percent of Iran’s oil exports last month, according to Kpler, which specializes in tracking Iran’s oil exports.

China “is highly exposed to the current instability in the Middle East, especially if it escalates,” said Philip Andrews-Speed, a longtime specialist in China’s oil policies at the National University of Singapore.

China, the world’s second largest economy, has become addicted to foreign oil at a stunning pace. As recently as the early 1990s, China was self-sufficient in oil. Now it depends on imports for about 72 percent of its oil needs.

By comparison, the United States’s reliance on imported oil peaked at about 60 percent around 2005, before the fracking boom transformed the United States into a net exporter.

Xi Jinping, China’s top leader, has kept energy security as one of the country’s top priorities through his decade in office.

“Energy supply and security are crucial for national development and people’s livelihoods, and are a most important matter for the country that cannot be ignored at any moment,” Mr. Xi said in July.

To that end, China has made giant investments in electric vehicles. It now dominates the world’s production of electric cars, and by August a third of the cars sold in China were electric, said Bill Russo, a Shanghai automotive consultant.

But gasoline consumption has stayed high, as new car sales gradually change the overall fleet of mostly gasoline-fueled vehicles on China’s roads. Driving has also surged this year, including during a weeklong national holiday this month, because China ended nearly three years of “zero Covid measures” that restricted travel.

Another reason for China’s oil thirst: It is the world leader in the production of petrochemicals, which are made from oil and natural gas.

China has little chance of shaking its reliance on oil imports, said Lin Boqiang, the dean of energy studies at Xiamen University in Xiamen, China. “Looking forward, I do not believe it can decrease substantially,” he said.

China does not officially acknowledge buying any oil from Iran, which is under broad international sanctions as it attempts to build nuclear weapons. But its purchases have been well documented by industry experts.

Iran relies on shipping oil aboard tankers that turn off their automatic location transponders, sometimes for weeks at a time, and often not turning them on again until they reach high-traffic waterways like the Strait of Malacca next to Malaysia.

China’s official statistics instead show Malaysia as one of China’s largest suppliers of oil, even though Malaysia has limited and shrinking oil production from aging oil fields.

Refineries in China that turn crude into gasoline and other products have shifted to buying more oil from Iran because Iranian oil is now cheaper than Russian oil, Mr. Pavlov said. Iranian oil sells at a discount to world prices of about $10 a barrel, despite sanctions, while Russian oil sells at a discount of about $5 a barrel, despite sanctions, he said.

“China always goes with what is cheapest,” he said.

While Russia has a long border with China, infrastructure limits Russia’s ability to ship more oil south.

Officials from Russia, China and Mongolia have held a long series of discussions over the past year on whether to build a natural gas pipeline, called Power of Siberia 2, that would link Russian gas fields across Mongolia to China. Building such a pipeline could allow oil shipments alongside it.

President Vladimir V. Putin of Russia has said he would attend Mr. Xi’s Belt and Road Forum in Beijing next week, reawakening speculation in the global energy industry on whether a pipeline deal might finally be concluded. But a pipeline would take many years to build and cost tens of billions of dollars.

“I’m highly skeptical of the pipeline’s commercial logic, but energy security and geopolitics might ultimately trump economics,” said Joe Webster, a senior fellow at the Global Energy Center of the Atlantic Council, a Washington research group.

Some of the oil that China buys is being put in storage tanks, which it is building at an even faster rate than its oil consumption has risen. China does not release figures for its reserves but they are believed to be considerable. Most experts guess that China’s oil reserves equal about 90 days of imports, which long has been the minimum that the United States has set for its Strategic Petroleum Reserve.

Energy security is not the sole factor in China’s decision-making on Mideast issues, said Bonnie Glaser, the director of the Indo-Pacific program at the German Marshall Fund of the United States, a Washington policy research group.

Beijing has tried hard to stay on friendly terms with the Islamic world even as China has cracked down on predominantly Muslim minorities in its far western region, Xinjiang. China has also tried to maintain relations with both Israel and Palestinians.

“The only way China has been able to achieve that goal is to avoid getting deeply involved,” Ms. Glaser said.

But whether China can maintain its distance from the Mideast’s troubles is less clear.

“Since America doesn’t import much oil from that part of the world, the countries in that part of the world start to think how their geopolitical alliances will be reshaped in the decades to come,” said Kevin Tu, a Beijing energy consultant. “China has become a major stakeholder in this region whether it likes it or not, and China needs to play a role to stabilize the region in the years to come.”

Li You contributed research.