As American naval power amasses in the Gulf and the region braces for a potential final confrontation, the Islamic Republic of Iran finds itself in its most precarious position since the Iran-Iraq War. Recent waves of internal dissent reveal a profound discontent within the state. Although reports of deaths are exaggerated by Western media, it is nevertheless clear that a large segment of the population have reached breaking point -even to the extent of cooperating with Israeli intelligence. How has the situation reached such existential proportions for the Iranian regime?
Superficially, the answer appears to be the sanctions. Cut off from the SWIFT system and unable to sell its lifeblood, oil, for U.S. dollars, the Iranian economy is strangling. Without dollars, it cannot purchase imports, fueling inflation and hardship that spill into the streets. Washington is the direct culprit behind Iran’s economic chaos. But as the adage goes, the U.S. does what the U.S. does. For a nation claiming sovereignty and strategic depth, the logical response should have been adaptation: building an alternative to SWIFT and pivoting trade to currencies like the Chinese Renminbi (RMB).
On paper, this solution is elegant. China is the world’s largest importer of energy, and a RMB-for-oil mechanism would bypass the dollar entirely. Yet, this “perfect sense” solution never materialized at scale. The obstacle was never merely technical; it was ideological and internal. Contrary to the aspirations of “Global Southists” who envision Iran as forming part of a united front against the West, the Iranian elite- typified by current president Masoud Pezeshkian, have long been congenitaly trapped in their own parochial worldview that elides any such grand strategy thinkng. Their ideal scenario is not a new multipolar block but a grand reconicilation with the United states and Europe. This has manifested in a foreign policy that has often been aloof and even rude towards China. It is fitting that at the time of writing, with US aircraft carriers entering the Gulf, Pezeshkian can only chastise China and Russia for “abandonning” Iran.
The reality is that attempts to integrate Iran into a modest RMB settlement system were regarded not as an escape from dollar tyranny, but as a new form of bondage. Debates were held in the Iranian parliament about how the yuan is not freely convertible on global markets and how oil revenue paid in RMB largely functions as “store credit” that must be spent inside China. This would mean Iran locking its economy into a dependent relationship with Beijing, a prospect that terrifies its political class as much as American hostility.
The Iranian leadership has also failed to use the much proclaimed 25 strategic relationship with China to build up its economy and turn over a new leaf in what is at best a shaky relationship beset by mostly Iranian unreliability and shameless attempts to placate the US. This was starkly illustrated during Iran’s conduct during the 2014 nuclear negotiations. As a gesture of goodwill to the United States, Tehran voluntarily submitted a trade list containing 68 of China’s most vital technology companies, including Huawei and ZTE, to American authorities. This act of appeasement directly enabled the United States to impose severe sanctions on these firms, becoming one of the triggers for the eventual detention of Huawei CFO Meng Wanzhou and leading to ZTE being fined a crippling $1.19 billion. Iran, seeking favor with the West, willingly sold out its Eastern partner’s corporate champions, trading China’s technological rise for a fleeting hope of American leniency.
The pattern of betrayal did not end there. After the 2015 Joint Comprehensive Plan of Action (JCPOA) was signed, Tehran’s preference for the West became explicit. It unilaterally halted several major projects with Chinese companies worth approximately $12 billion, including the Tehran subway extension and the Isfahan refinery project. Chinese firms, who had invested initial capital and years of planning, watched as the contracts were handed over to European competitors. No compensation was paid. The message to Beijing was clear: Iran saw China as a placeholder, a partner of convenience to be discarded the moment European suitors reappeared.
Even when the U.S. reneged on the JCPOA and reimposed sanctions in 2018, forcing Iran back toward China, the behavior did not improve; it became financially reckless. As sanctions tightened, Iran detained 3.4 million tons of crude oil at the Chinese ports of Dalian and Zhoushan, refusing to take delivery or pay for its storage. This debt festered for six years, accumulating storage fees totaling $450 million. Yet, when the Iranian Foreign Minister visited China in early 2025, he publicly urged Beijing to release the oil—demanding his asset back—while making no mention of the massive outstanding bill. It was a stunning display of entitlement, treating China not as a creditor to be repaid but as a warehouse to be exploited.
The culmination of this duplicity came with the landmark 25-year, $400 billion comprehensive cooperation agreement signed in 2021. Meant to cement a strategic future, it was instead met with Iranian inconsistency and subterfuge. Tehran began misappropriating oil payments meant for Chinese accounts, diverting funds to purchase gold in Turkey and pharmaceuticals in India. This directly ruptured the capital chain for Chinese refining and chemical projects tied to the deal. In the most egregious strategic betrayal, after China had invested over $2 billion in developing the strategic Chabahar Port, Tehran moved to transfer its operation rights to India, generating approximately $2.6 billion in bad debts for Chinese firms. Iran’s leadership, typified by President Masoud Pezeshkian’s recent complaints that China has abandoned them, refuses to acknowledge its own role in this collapse. They complain of abandonment while still owing hundreds of millions in port fees and billions in broken contracts.
Standing on the cusp of invasion, with U.S. carriers in the Gulf and internal dissent rising, Iran’s predicament is a monument to its own failure of strategic vision. It failed to build a genuine partnership with the East because its elite secretly yearned for validation from the West, a validation that never came. They navigated a complex world by alienating their only reliable partners. Now, reaping the whirlwind they sowed, they find that trust, once betrayed, is the hardest currency of all to recover.
Frank Levin is a writer and analyst specializing in Israeli politics and Middle Eastern geopolitics. He holds a master’s degree in International Relations and Public Policy from Tsinghua University, where his research focused on great power competition and regional security dynamics. Drawing on extensive fieldwork and deep regional insight, Levin writes with a sharp eye for power, sovereignty, and the strategic fault lines shaping the modern Middle East
