As the economic crisis in Iran deepens, China has begun to reduce its trade with Iran, including decreasing exports and temporarily suspending some refined oil exports. In Iran, the exchange rate of the US dollar to Iranian rial has once surpassed 2.7 million, leading to skyrocketing inflation and a near disappearance of oil revenue. Economists estimate that if the blockade continues, by June 2027, the Iranian regime may struggle to maintain economic operations and provide public services.
China has long been Iran’s largest oil buyer and one of its most important trade partners. Despite facing US sanctions, Beijing has continued to purchase large quantities of Iranian crude oil. A report by Reuters in September of this year highlighted how Iran had previously used arrangements like “oil-for-goods” to circumvent sanctions, exchanging oil for Chinese goods and related credit lines, providing crucial economic support for Tehran.
However, with the ongoing tensions between the US and Iran, as well as stricter US economic measures against Iran, Iranian oil exports have been severely impacted. The volume of Iranian crude oil acquired by Chinese buyers has also started to significantly decline. Beijing believes that Iranian oil exports are unlikely to recover in the short term, thus prompting adjustments to its economic and trade relations with Iran. This shift may also be connected to the “Xi-Jinping Summit” held in Washington about a week and a half ago, where the Iran conflict was on the summit agenda.
One of the measures implemented by the Chinese government is the suspension of some Chinese refined oil exports. With maritime routes through the Strait of Hormuz blocked, air routes closed, and the US threatening sanctions on countries and companies operating flights to Iran, China is now reducing its overall goods transportation to Iran. An analyst familiar with the situation in China stated that Beijing perceives little chance of a quick end to the war or Iran’s ability to recover.
Meanwhile, Iran’s economic crisis is worsening. The exchange rate of the US dollar to the Iranian rial on the open market has at one point surpassed 2.7 million rials, while the euro to rial exchange rate has exceeded 3 million. The Central Bank of Iran attempted to inject around 2 million US dollars into the market to prevent currency collapse but was unsuccessful as the rial continued to plummet.
The US maritime blockade has successfully reduced Iran’s oil export revenue to almost zero. Due to financial restrictions and sanction threats, the Iranian regime is struggling to receive payments from the few remaining international customers.
According to the International Monetary Fund (IMF), Iran’s annual inflation rate is estimated to be between 70% and 73.6%. Some independent economists and black market exchange rates suggest that the actual inflation rate is nearing 100%. Since the outbreak of the war, basic food prices in Iran, including meat and dairy products, have risen by 120% to 150%.
The official unemployment rate is close to 10%, but it is estimated that the actual unemployment rate could be three times higher. Reports indicate that resignations have surged in the public sector, including among teachers and doctors, as the government struggles to pay salaries.
To alleviate government deficits, Iranian authorities have cut fuel subsidies and restricted the purchase limits at gas stations, exacerbating public dissatisfaction and potentially sparking further protests. To control losses, the Tehran city government has frozen prices of 12 essential goods, while businesses intentionally create shortages and sell goods on the black market.
At the same time, Iran has effectively lost its crucial strategic leverage almost entirely—the ability to block the Strait of Hormuz. With the US military escorting, the volume of crude oil exports passing through the Strait of Hormuz from the Gulf has gradually returned to pre-war levels.
Economist Professor Shlomo Maoz believes that if the US continues to block the Strait of Hormuz and the air routes used for cargo transportation, the complete collapse of the Iranian economy may only take a few months. He estimates that by June 2027 at the latest, the regime will be unable to sustain economic operations or public services.