Could new US sanctions tear China and Iran apart?

China has pushed back on what it called "illegal unilateral sanctions" after the US announced new measures earlier this week to cut off all potential sources of revenue to Iran.

US Treasury Secretary Scott Bessent on Monday described the sanctions package as an "economic D-Day" against Tehran, and warned any economic engagement with the regime would "expose those responsible to the full reach" of US power.

China is Iran's top trade partner and provides a lifeline to Tehran mainly through oil purchases , but also with banking, technology and dual-use goods, which can be used both for civilian and military purposes.

When asked whether Chinese banks would be included in the new measures, Bessent warned that "no one was above the reach of US sanctions."

But with US President Donald Trump due to meet his Chinese counterpart Xi Jinping in September, Washington will need to be careful with any moves affecting China-Iran trade ties.

The initial US sanctions package stops short of targeting major Chinese banks. Instead, it focuses on 60 smaller entities, individuals, and vessels, both in mainland China and Hong Kong, that are part of the ecosystem supporting "illicit nuclear and missile technology procurement, cyber operations, and oil‑revenue generation networks."

China purchases up to 90% of Iranian oil exports, some of it through independent "teapot" refineries which end up rebranding the oil or using intermediaries to bypass US sanctions.

In May, China's Commerce Ministry ordered domestic businesses and teapot refineries to ignore US restrictions targeting several of these refineries. At the time, Bessent said China's Iran oil purchases amounted to "funding the largest state sponsor of terrorism."