Secretary of State Mike Pompeo called violent attacks on Saudi oil infrastructure in Abqaiq and Khurais “an act of war,” as evidence suggests that Iran is the culprit. This marks the most dangerous escalation between the U.S. and Iran since the seizure of the American embassy in Tehran. However, this confrontation has major implications for the growing U.S. – China strategic rivalry.

Amidst historic U.S. – Iran tensions, Beijing is doubling-down on its strategic partnership with Tehran, ignoring U.S. efforts to isolate the Islamic Republic from global markets. Following an August visit by Iran Foreign Minister Mohammad Javad Zarif to Beijing, the two countries agreed to update a 25-year program signed in 2016, to include an unprecedented $400 billion of investment in the Iranian economy – sanctions be damned.

The capital injection, which would focus on Iran’s oil and gas sector, would also be distributed across the country’s transportation and manufacturing infrastructure. In return, Chinese firms will maintain the right of the first refusal to participate in any and all petrochemical projects in Iran, including the provision of technology, systems, process ingredients and personnel required to complete such projects. According to an exclusive interview with Petroleum Economist, a senior source in Iran’s petrochemical sector had this to say about the new agreement:

     The central pillar of the new deal is that China will invest $280 billion developing Iran's oil, gas and petrochemicals sectors… there will be another $120 billion investment in upgrading Iran's transport and manufacturing infrastructure, which again can be front-loaded into the first five-year period and added to in each subsequent period should both parties agree.

This comes at a time when Washington is exerting its so-called ‘maximum pressure’ strategy against Iran, which aims to change its international behavior by bringing oil exports down to zero.

The Trump policy is a 180 degree U-turn form the sanctions relief granted by the previous administration’s Joint Comprehensive Plan of Action (JCPOA). The Obama brainchild intended to temporarily freeze the Iranian nuclear program, but ignored its regional power projection and growing missile arsenal. Under the agreement, Iran’s economy rebounded by over 12%  compared to when sanctions were in full force. However, Iran continued to build intermediate and short-range ballistic and cruise missiles and drones, and fund proxies from Lebanon and Syria, to Iraq, to Yemen.

The Trump Administration’s sanctions, however, have cut Iran’s economic growth down to a meager 3.7%. The country’s oil output – the lifeblood of the economy -- dropped from almost 4 million barrels per day (mbd) in 2018 to barely above 2.5 mbd in March of this year, and the exports declined to a trickle.

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