Soft Balancing in the Gulf: China’s foreign policy towards Iran and the implications for the United States’ regional hegemony

Abstract

How does China’s engagement with Iran affect the U.S. hegemony in the Gulf? Drawing on soft balancing and multiplex world order frameworks, this paper analyzes contemporary China–Iran relations along three axes: strategic partnership through Iran’s membership in the Shanghai Cooperation Organization; Chinese diplomatic mediation between Iran and Saudi Arabia; and China’s economic and financial partnerships with Tehran through the Belt and Road Initiative. We argue that these axes are fundamental tools of political-diplomatic engagement and economic-financial relations that China mobilizes to soft balance the U.S. in the Gulf. By doing so, Beijing challenges Washington’s primacy in the region while avoiding direct military confrontation with it. The article deepens understanding of China’s Gulf strategy and explores Iran’s role in it.

Keywords:
China; Iran; United States; Gulf; Soft balancing

Introduction

The prospect of China consolidating itself as a great power stands as one of the most significant developments in contemporary international affairs. Over the last 40 years, the country has undergone a remarkable transformation from an underdeveloped, predominantly agricultural nation to a leader in high-tech industrial manufacturing, the world’s leading global industrial exporter, and a rapidly urbanizing, middle-class society.¹ China’s achievements can also be seen in international politics, as it has been a full member and supporter of many established international institutions since the 1970s, including the United Nations (UN), the Bretton Woods system, and the G20. Additionally, initiatives created by China or in which it played a leading role in funding include the Belt and Road Initiative (BRI), the Shanghai Cooperation Organization (SCO), the Asian Infrastructure Investment Bank (AIIB), and the BRICS.

Chinese foreign policy has historically prioritized engagement in the Asia-Pacific region, deemed strategically important for both economic and security reasons (Liu 2023; He and Li 2020). However, since Xi Jinping’s rise to power in 2013, other regions have gained prominence, with the Middle East,² in general, and the Gulf subregion,³ in particular, emerging as key areas. This shift involves not only oil and gas supplies but also geopolitical considerations. The intensification of China’s relationship with the Gulf must be understood within the broader context of the United States’ (U.S.) regional presence (Calabrese 2023).

Over the past two decades, U.S. policy in the region has been marked by military overreach, shifting objectives, and a transactional approach to old allies (Simon 2021). The military operations in Afghanistan (2001) and Iraq (2003) have proven to be prolonged, destabilizing, and ultimately inconclusive military campaigns⁴ (Hall 2024). In Iraq, the removal of Saddam Hussein and the disbandment of state institutions created domestic destabilization that allowed the rise of extremist groups like the Islamic State. In Afghanistan, two decades of war concluded with a troubling U.S. withdrawal and the Taliban’s return to power in 2021, severely undermining Washington’s credibility as a reliable partner.

Additionally, Washington’s unwavering alliance with Israel, particularly in the context of Israeli genocide against Palestinians in Gaza since October 2023, the so-called June 2025 “12-Day War” against Iran, the Israeli attacks on Qatar in September 2025, and, more recently, the 2026 February-April U.S.–Israel war against Iran have further complicated the U.S.’s standing in the Middle East.⁵ While the 2020 Abraham Accords aimed to normalize relations between Israel and some Arab states, such as the United Arab Emirates (UAE), Bahrain, Morocco, and Sudan, with the prospect of including Saudi Arabia, the U.S.’s indisputable support for Israel has continued to provoke contestation among these nations, especially in the public opinion domain.

Given that the Gulf has been under U.S. hegemony since the early 1980s,⁶ the recent Chinese engagement with the subregion raises a fundamental question: How does China’s engagement with Iran affect the U.S. hegemony in the Gulf? By employing primary and secondary data in a qualitative case study, cross-referencing official sources, and conducting a literature and documental analysis to assess China’s foreign policy, we argue that the Gulf has become a crucial locus where China is actively challenging Washington’s regional primacy through a soft balancing strategy. This strategy involves using non-military tools such as institutional balancing, diplomatic coalitions, and economic statecraft to challenge an established great power while avoiding direct military confrontation with it (Paul 2018, 2005; Pape 2005).

So, Beijing aims to soft balance the U.S. in the Gulf, particularly by providing Iran with economic, diplomatic, and security assets that ultimately call into question the longstanding U.S. regional hegemony. Nevertheless, rather than engaging in direct military confrontation with Washington, Beijing’s approach focuses on forming limited diplomatic coalitions, enhancing economic and financial ties with Tehran to challenge unfavorable policies, and leveraging international institutions to shape Iran’s foreign policy decisions. We argue that the primary instruments to advance this soft balancing strategy are i) establishing a comprehensive strategic partnership with Iran; ii) mediating a diplomatic rapprochement between Iran and Saudi Arabia; and iii) Iran’s official participation in the BRI and the SCO.

Thus, China’s involvement in the Gulf, characterized by extensive infrastructure investments and growing political, diplomatic, and security cooperation, suggests an aim to promote a potential “post-U.S. hegemonic” regional order, marked by a more prominent and independent role for the Gulf’s regional powers. Although China aims to challenge the U.S., the limits in doing so are evident. Some consider China’s foreign policy towards the Gulf to consist of “hedging” (Huwaidin 2022; Garlick and Havlová 2020). Instead, we argue that it aims to soft balance the U.S.

To develop and illustrate these arguments, this article is organized into three sections. First, we characterize the main features of today’s world affairs, highlighting the ongoing structural changes and the importance that the Gulf has gained in China’s contemporary foreign policy. We also discuss the relevance of applying the soft balancing concept to describe China’s foreign policy strategy in the region. In the next section, we present our case study and analyze the China-Iran relationship, focusing on the BRI, the SCO, and the Iran-Saudi diplomatic rapprochement. We also explore the implications of these initiatives for U.S. regional hegemony. In the final section, we summarize the main points and suggest ways to further investigate this crucial topic in contemporary international affairs.

Structural changes in the world order and the relevance of the soft balancing strategy

Over the last twenty years, structural changes have led to significant transformations in global affairs. A key development has been China’s emergence and establishment as a great power (Lind, 2024; Yan 2013), while another notable shift is the relative withdrawal of the United States from the liberal international order under Trump’s first mandate (2017-2021) and the consequent decline of Western influence within it (Acharya 2023). These dynamics have created opportunities for establishing new normative frameworks, multilateral institutions, and geopolitical partnerships across various regions. Since the global financial crisis of 2008–2009 and, more recently, the Russian invasion of Ukraine in 2022, and Israel’s genocide in Gaza since October 2023, it is clear that substantial changes are occurring worldwide. However, there is still no consensus on how to best define this emerging critical juncture.

Some scholars view these changes as signs of a consolidating “post-Western world” order (Stuenkel 2016), while others suggest that the American-led liberal hegemony has ended, leading to a “multiplex” (Acharya 2023) or a “multi-order” world (Flockhart and Korosteleva 2022). A multiplex world order, in particular, is a world of interconnectedness and interdependence, characterized by the absence of a single hegemonic global order, but rather a complex web of cross-cutting and competing international orders (Acharya 2017). This does not mean that all players in this order are equal in power; however, none alone can create and dominate the institutions of global governance. An accommodation of new players and approaches that can present distinct perspectives according to their preferences must be formulated. Acharya (2017) argues that the stability of the multiplex world order depends on the functionality of regional orders. In this type of order, regions are not merely subordinate units within a hierarchical global system but critical areas where order is produced, maintained, and contested. This view diverges from liberal universalist assumptions that often treat regionalism outside the West as either marginal or potentially destabilizing. Instead, Acharya (2017) considers regional initiatives as complementary to the world order, offering alternative mechanisms for cooperation and problem-solving tailored to specific regional contexts.

While these debates primarily address the structure of the international system, it is also important to consider regional power dynamics, as regional powers have taken on vital roles by either supporting or challenging the global order. In particular, the 21st century has seen considerable shifts in the Middle East. Previously viewed as a pivotal region for U.S. geopolitical and economic interests, its repeated mismanagement in the 2000s has created opportunities for regional states to reassess their ties with the regional hegemon and with outside key players, aiming to secure economic development, political independence, and influence their surroundings (Shahbaz and Hassaniyan 2024).

Two recent developments underscore significant shifts in Middle Eastern geopolitics. The first is Hamas’s October 2023 attack on Israel, followed by Israel’s massive military retaliation—characterized by specialists and international human rights organizations as genocide—, due to the devastation of Gaza and its Palestinian population, incursions into southern Lebanon, and bombings in Iran and Qatar. The second is the November 2024 ousting of Syria’s Bashar al-Assad by Tahrir al-Sham (THS), a change that has weakened the entrenched strategic presence of Iran and Russia in the region. Since then, influential Middle Eastern powers such as Iran, Israel, and Saudi Arabia have continued their attempts to secure peace and stability, albeit based on distinct and sometimes conflicting visions of regional order. Yet, in recent years, a new external actor has emerged with the potential to affect regional geopolitical dynamics: China.

Although many scholars highlight the economic aspects of China’s foreign policy in the region (Chaziza 2025; Wen and Chen 2022), its geopolitical aspect has also become increasingly apparent (Parsi and Aljabri 2023). Beijing has sought to maintain balanced ties with all major regional players, particularly with Iran and Saudi Arabia. For example, in 2023, China brokered the normalization of diplomatic relations between Saudi Arabia and Iran, marked by the reopening of embassies between the two countries.⁷ Even though Tehran and Riyadh have been regional rivals since 1979, China has maintained political-diplomatic relations with both countries (Ghiselli and Ehteshami 2024) and has surprisingly played a mediating role in their diplomatic thaw. While the long-term consequences of this diplomatic advancement remain unclear, China’s involvement is noteworthy.

Notably, Beijing has no defense agreements with any Middle Eastern nations and does not operate military bases in the area; instead, it relies on economic and political leverage. Significant platforms in this context include the BRI, the SCO, and the China–GCC Summits. Sun and Zoubir (2015) describe these Chinese involvements as “geo-economic,” emphasizing political, diplomatic, and economic strategies over military engagements. However, in this paper, we contend that China is employing a soft balancing strategy towards the U.S. in the Gulf.

In the formulation proposed by T. V. Paul (2018; 2005), soft balancing refers to the use of non-military instruments to constrain the behavior of a more powerful state in contexts where hard balancing is impractical or too costly. It encompasses a range of political and diplomatic tools, including the formation of limited diplomatic coalitions, the enhancement of economic ties among states, and the use of international institutions and rules to shape foreign policy decisions. Leveraging institutions entails engagement in multilateral arenas to impose procedural and normative constraints. By mobilizing rules, voting mechanisms, and legitimacy claims, states seek to raise the political costs of a great power’s unilateral action and to shape the terms under which power is exercised.

Limited diplomatic coalitions and economic statecraft reinforce these dynamics. States form flexible, issue-specific coalitions or alignments to coordinate opposition and amplify their influence in international debates, as illustrated by the diplomatic resistance surrounding the 2003 Iraq War. At the same time, economic statecraft enables states to leverage interdependence by strengthening economic and financial ties or by using trade and financial instruments to circumvent sanctions and diplomatic isolation. These mechanisms may operate independently or in combination, but they ultimately seek to challenge the established power without direct military confrontation.

While soft balancing has been widely studied in the context of great power dynamics, it also offers important insights into the behavior of regional powers. Although it involves nonmilitary measures, soft balancing is intended to challenge existing power structures. This approach differs from traditional diplomacy in that it seeks to alter the balance of power and restrict state behavior. Rather than attempting to revise the established regional order, its goal is to impede and limit the regional hegemon’s actions.

Some authors argue that China’s approach in the Gulf is best characterized as “hedging” (Sun et al. 2024; Garlick and Havlová 2020; Chaziza 2015; Salman, Pieper, and Geeraerts 2015). Rather than aligning unequivocally with Iran against the United States, Beijing cultivates strong ties with both Iran and its regional rivals, including Saudi Arabia and the UAE. This strategy helps secure critical energy supplies, expand economic influence, and enhance geopolitical leverage, all while avoiding entanglement in regional conflicts or confrontations with the U.S. The concept of hedging involves diversifying diplomatic and economic engagements to minimize financial, commercial, and investment risks without committing to rigid alliances. The hedger does not challenge the regional hegemon or alienate regional powers, but promotes itself as a valuable partner for everyone (Tessman 2012). Proponents of this perspective argue that this strategy aligns with China’s engagement in the Middle East, as it enables the country to deepen energy deals with Iran while investing heavily in infrastructure projects across the GCC states (Fulton 2023). This approach suggests that China avoids formal military commitments or ideological alignments, opting for a pragmatic, non-interventionist policy that allows it to engage with all parties without forming binding alliances.

Nevertheless, while the concept of hedging captures key aspects of Beijing’s strategy in the region, particularly its cautious and risk-averse approach to the current correlations of force with Washington, it does not fully encompass the significance of China’s primary interests and long-term objectives in the Middle East, nor it considers the changing dynamics that have been happening in the region in the last decade. This oversight primarily stems from the assumption that China intends to engage in the region without any intent to counterbalance U.S. regional hegemony. However, in a Report delivered to the 20th National Congress of the CCP, on October 16, 2022, Xi emphasized its anti-hegemonic campaigning, whether it manifests in regions or worldwide.⁸ China’s Gulf foreign policy approach reflects a long-term goal of establishing a new political, economic, and security framework through which China and the Gulf states can operate more independently of U.S. mechanisms, thereby reducing Washington’s ability to maintain its hegemony without facing constraints.

For example, amid the 2026 U.S.–Israel war against Iran, Pakistan’s Foreign Minister Ishaq Dar, together with Turkey, Egypt, and Saudi Arabia, led an initiative aimed at advancing negotiations to a cease-fire and met his Chinese counterpart, Wang Yi, to discuss a framework for a five-point plan to restore peace and stability in the Middle East.⁹ This diplomatic move signals that Iran, the U.S., and other Middle Eastern countries acknowledged China’s position as a potential guarantor of a future regional peace settlement. It also created conditions for China to cultivate an image, shared among some of the U.S.’s main Gulf allies, that portrays Washington as the main source of instability in the subregion, while presenting China as a more reliable actor.¹⁰

Moreover, China’s expanding relations with Gulf countries in infrastructure, technology, and oil and gas have also placed Beijing in a position of leverage among them.¹¹ This is reflected in coordinated efforts to promote the use of the renminbi or local currencies as the preferred way of payment for new contracts, as these countries remain attentive to the adverse effects of dollar hegemony on financial globalization (Pforr et al. 2025) and to Washington’s discretionary ability to weaponize financial infrastructure (Taylor 2025; Wade 2024; Farrell and Newman 2019).¹² Besides, the expansion of security cooperation and economic entanglements through multilateral institutions such as the SCO and BRI, and the broader institutional integration of Iran into non-Western economic and diplomatic initiatives,¹³ provides these states with economic and political resources that challenge longstanding U.S. regional hegemony. This strategy can be understood as soft balancing, aimed at constraining the hegemon without resorting to conventional military means.

The Middle East in the Chinese foreign policy: from oil to geopolitics

It was not until recently that the Middle East gained a place on China’s diplomatic radar (Olimat 2023). Since the 1949 Revolution and during the Cold War, China engaged with Arab countries within the context of Third World solidarity and the “Bandung spirit,” which translated into supporting many anticolonial struggles—such as the Popular Front for the Liberation of the Occupied Arabian Gulf and the Dhofar Liberation Front—and providing some of them with political and symbolic support, as well as limited economic development assistance. Until the 1970s, China’s support for the Communists in Asia, Africa, and the Middle East had been one of the pillars of Mao Zedong’s foreign policy, emphasizing a revolutionary rhetoric and practice of contesting what he called the “two imperialists”—the United States and the Soviet Union—and the remaining colonial system their European satellites still struggled to preserve. This posture contributed to a degree of alienation between China and the region, as many monarchies at the time considered the Communist ideology and its encouragement of profound changes incompatible with Islam and with their close ties to either the Western bloc or the Soviets (Huwaidin 2022). Despite this, diplomatic relations were established in the 1950s and 1960s between China and Algeria, Egypt, Iraq, Iran, Israel, Morocco, Sudan, Syria, Tunisia, and Yemen.

Since Deng Xiaoping’s 1978 “reform and opening up” policy, the country has adopted a more reformist and pragmatic approach to world affairs (Sutter 2021). This marked the beginning of China’s unprecedented economic rise and profound transformation, along with corresponding changes in its global status.¹⁴ From the 2000s onwards, Beijing has taken on an increasingly active role in many regions, with the Middle East standing out as one of the most significant. For an extended period, China’s interest in the Middle East was mainly driven by economic considerations, ranging from arms sales to energy needs.¹⁵ China became a net oil importer for the first time in 1993 and, by 2013, had become the world’s largest oil importer. According to the World Bank, the Middle East accounted for about 7% of China’s total imports and 5% of its total exports in 2021. In energy terms, the region accounts for around 40% of China’s total oil imports.¹⁶ In 2000, China exported US$7.6 billion and imported around US$11 billion from the Middle East and North Africa. In 2022, these numbers increased to a total exported worth of US$200 billion and imports around US$280 billion, a more than 2000% increase.¹⁷

Meanwhile, geopolitically, the United States remained the region’s primary external power, maintaining a military presence and security partnerships with Saudi Arabia, Israel, Egypt, Jordan, Qatar, and the UAE. The U.S. presence in the region was ultimately designed to support a status quo that benefited Washington’s main allies, particularly Israel and the GCC states, who were integrated into a security architecture that included defense and facilities cooperation agreements, military-to-military cooperation, arms sales, and a network of bases. This architecture created the conditions for other extraregional powers, including China, to engage with the region without a corresponding security commitment. That does not mean, though, that Beijing supported all the U.S. policies in the region. Like many countries, it opposed the Iraq War, but not to the point that it was willing to challenge Washington directly over it. The U.S. regional preponderance is the defining characteristic shaping China’s approach to the Middle East over the last decades (Fulton and Schuman 2024).

However, this regional dynamic began to change when Chinese President Xi Jinping came to power in 2013, introducing a geopolitical dimension to its engagement with the region (Smith 2021). While economic and energy concerns continue to shape China’s relationship with the Middle East, its approach has become more diversified (Yetim and Hazar 2025). This is clear in China’s expanding ties with GCC countries (Fulton 2023) and Iran (Garver 2016), as it aims to establish itself not only as a key energy importer but also as a regional partner in infrastructure, technology, and even security cooperation. This can be seen, for instance, with establishing a “comprehensive strategic partnerships” with the UAE (2018), Iran (2021), Saudi Arabia (2022), Bahrain (2024), and a “strategic partnerships” with Qatar (2014) and Oman (2018) that go beyond economic links, as they encompass cooperation and development in international and regional affairs, including military.¹⁸ Another sign of China’s security presence is the People’s Liberation Army Navy (PLAN)’s patrols in the Gulf of Aden and its military support base in Djibouti. The number of joint military exercises in the region has increased since 2014, with the Chinese armed forces conducting operations with Iran, Saudi Arabia, Egypt, and Pakistan (Rumley 2022).

Two official documents provide important sources for China’s policy toward the Middle East.¹⁹ The first is the set of final declarations and Plans of Action from the ministerial meetings of the China–Arab States Cooperation Forum²⁰ (CASCF), which outlines the scope and priorities of China’s engagement with the 22 Arab countries involved. The second is the 2016 China-Arab Policy Paper, which sets out China’s regional guiding principles.²¹ At the 2014 CASCF summit, Xi introduced the “1+2+3” cooperation framework, comprising: (1) energy supply, (2) trade, infrastructure, and finance, and (3) high-tech sectors including nuclear technology, space, and renewable energy. While these areas emphasize economic and financial ties, the innovation lies in the mechanisms employed and the broader strategic approach underpinning them. For example, China’s Arab Policy Paper should be considered alongside China’s broader initiatives, especially the extension of the SCO and BRI to the region, which provide a more comprehensive view of Beijing’s interests and goals in the area.

In Xi’s delivery at the 19^th Communist Party of China Congress in 2017, he called countries and peoples to “work together to build a community with a shared future for mankind, to build an open, inclusive, clean, and beautiful world that enjoys lasting peace, universal security, and common prosperity” (CPC 2017, 52). This idea is not especially new, but Xi has recently emphasized the concept of a shared future on a global level (The State Council of the PRC, 2022). This proposition presents an alternative to the U.S. Deputy Secretary of State Robert Zoellick’s “responsible stakeholder” approach (U.S. Department of State 2005), which envisioned China’s full integration into a U.S.-led liberal international order. In contrast, Beijing’s preference implies a redistribution of normative authority, suggesting that the United States must also adapt to accommodate China’s interests, including in the Gulf (Yan 2020).

Soft balancing in the Gulf: Chinese foreign policy towards Iran

As we demonstrate in the following subsections, the main argument is that Chinese engagement with Iran comprises three major components that, taken together, constitute a soft balancing strategy against the U.S. in the Gulf. The first component is economic-financial and concerns the presence of Chinese currency, state-owned enterprises, investment, and capital flow into Iran. The second component concerns what Fulton (2023) calls “strategic partnership diplomacy,” a political-diplomatic relationship with countries that encompasses both economic and geopolitical considerations. The third component concerns the institutional mechanisms through which China seeks to engage with Iran, particularly via the BRI and the SCO.

A key driver of the deepening ties with Iran is the structural impact of U.S. sanctions on Iran’s economy and, consequently, on its foreign policy reorientation (Bazoobandi 2024). The reimposition of unilateral sanctions by the Trump administration in 2018, following the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA), marked a turning point in Tehran’s strategic calculations. A 2021 report by the IMF revealed that, as a result of Trump’s “maximum pressure” campaign, Iran’s Gross Official Reserves plummeted: from an average of US$70 billion between 2000 and 2017, and US$122.5 billion in 2018, to just US$12.4 billion in 2019 and a dramatic low of US$4 billion in 2020.²²

The compounded economic and diplomatic isolation drove Iran to seek closer alignment with China and Russia, both of which have positioned themselves as alternatives to the U.S.-led liberal international order. In this context, Iran’s “Look East” policy has become a central pillar of its foreign policy strategy, especially under the administration of Ebrahim Raisi (2021–2024). Azizi (2023) argues that the doctrinal basis of Iran’s foreign policy, traditionally guided by the principle of “neither East nor West” since the 1979 Revolution, has been transformed. Iran has been fostering alliances with Beijing and Moscow to circumvent U.S. sanctions and mitigate the West’s policy of isolating it. To some authors (Wen and Chen, 2022), the foundation of Sino–Iranian relations is primarily economic. The deepening of the economic bilateral relationship is part of a broader Chinese strategy to extend its economic presence across the Middle East, driven mainly by China’s increasing energy needs—in 2024, China bought 77% of Iran’s oil, valued at US$29 billion.²³ As a result, their bilateral economic and diplomatic relationship has become highly strategic and complementary. However, these ties have gradually expanded to encompass military and security cooperation, as we show in the following sections.

Diplomatic entanglement: Saudi-Iran rapprochement and China’s role as mediator

Beyond the economic aspect, the 2023 China-mediated détente between Iran and Saudi Arabia is an important milestone in regional power dynamics. More importantly, it showed China’s ability as a diplomatic mediator. We assess this development within a broader geopolitical context in which the U.S. remains central in the Gulf, but, at the same time, its continued support for Israel is exacerbating instability and distrust among Arab countries regarding Washington’s conditions for providing them with stability and order. This development is also seen as a response to regional fatigue stemming from prolonged conflicts, intensifying power competition, and the perceived decline in the United States’ political—not military— regional engagement (Hwang 2024). Therefore, the Chinese-brokered agreement signals an aim to foster Iran’s regional realignment towards old rivals and a potential construction of a multiplex regional order, in which non-Western powers like China can play a role.

Historically, the Saudi–Iran rivalry has been driven by ideological differences and competing visions for regional influence (Mirza et al. 2021). The 1979 Revolution turned Iran into a revolutionary theocratic state, deepening geopolitical divisions with the Saudis. Over the following decades, Saudi support for Iraq during the Iran–Iraq War (1980–1988) and the 2003 U.S. invasion of Iraq destabilized the region and affected Iran’s influence in the “Axis of Resistance.” Additionally, the Arab uprisings and Tehran’s growing regional role in backing Bashar al-Assad in Syria, as well as local armed groups, such as Yemen’s Houthis, alarmed Saudi Arabia, leading it to adopt an assertive foreign policy against its antagonist.

This situation altered Iran’s perception of the Saudis. Instead of viewing Riyadh as simply a subordinate U.S. ally, it began to regard the Kingdom as an independent and potentially threatening regional rival (Zhang 2024). Iran’s concerns about Saudi Arabia’s growing power were heightened by the recent strengthening of the bilateral relationship with China, which expanded significantly through Beijing’s investments in Saudi Arabia’s Vision 2030 program. However, despite these developments, China managed to maintain a balance in its ties with both, maintaining what Zhang (2024, 244) calls a “unique ability to act as a guarantor of peace” through economic leverage and non-interventionist diplomacy.

The path toward détente involved earlier mediatory efforts by Iraq and Pakistan beginning in 2019, especially after the Iranian missile attack on Saudi oil facilities and the noticeable lack of U.S. military retaliation (Baghernia 2024; Zhang 2024). The Kingdom saw this inaction as a sign that it could no longer depend on the U.S. for unconditional military support. This led Riyadh to diversify its alliances as part of a long-term strategy to stabilize the domestic regime and the regional order, as demonstrated by the September 2025 Strategic Mutual Defense Agreement with Pakistan, right after Israel attacked Qatar.²⁴ Meanwhile, Iran was under intense pressure from U.S. economic sanctions, which have significantly reduced its oil exports and increased its isolation. In this context of mutual insecurity, Iran and Saudi Arabia recognized a shared interest in easing tensions. They also acknowledged China’s importance as an economic partner and a player capable of providing regional stability without following the historical modus operandi of the U.S., which often involved military interventions and financial coercion.

It is worth noting that, for Beijing, ensuring stability between these rivals is a political and economic necessity, as both states occupy critical territorial nodes within the BRI. Consequently, this mediation transcends a simple hedging movement. In fact, it represents a soft balancing strategy and a proactive advance of a China-led regional architecture that challenges the foundations of U.S. hegemony in the Gulf.

China’s role in the mediation was decisive in the final stages of the agreement (Bazoobandi 2024; Zhang 2024). There was recognition that, since China is the largest trading partner for both and has a long-standing policy of non-interference, it has credibility to act as a peace guarantor. China became the first non-Western power to mediate a diplomatic breakthrough between two of the region’s major rival states. Also, the intention of Saudi Arabia to establish a strategic defense partnership with China,²⁵ along with Riyadh’s decision to no longer continue with a comprehensive defense treaty with Washington as long as the Israeli genocide in Gaza persists,²⁶ points in the same direction. Therefore, China aims to exploit regional concerns about the U.S.’s Middle East policy to create and capitalize on gaps between Washington and its regional allies and partners.

Iran and Saudi Arabia’s efforts to normalize relations thus highlight a potential regional shift in Gulf alignments toward greater independence for the regional powers and toward easing tensions, which aligns with China’s soft balancing strategy goals. While the United States remains a key player, Beijing’s increasing non-military efforts represent a subtle yet clear challenge to the current U.S. position in the region, contributing to the emergence of alternatives to U.S. foreign policy among regional powers.

Balancing geopolitical institutions and economic-financial ties: The BRI and the SCO

Another aspect of China’s soft balancing is the incorporation of Iran into the BRI and the SCO. The BRI is one of the most distinguished and ambitious dimensions of Xi’s foreign policy. Launched in 2013, it acquired more specific outlines in March 2015 through the “Vision and Actions on Jointly Building the BRI,”²⁷ in which China proposes to create a cross-regional network of integration connecting China to Europe via Central Asia and the Middle East, utilizing roads, bridges, ports, telecommunications networks, pipelines, and other infrastructure. Encompassing more than 150 countries and with more than US$1 trillion in investment and construction contracts already secured,²⁸ the BRI can serve as both a means for China to access new markets and expand its influence worldwide.

The BRI has an organizational framework consisting of six Economic Corridors, one Silk Road Economic Belt, and a Maritime Silk Road, through which China connects to Europe and Africa. The so-called “China-Central Asia-West Asia Economic Corridor” is one of the most critical corridors, linking China to the Caucasus, traversing Central Asia, and passing through Iran.²⁹ The Middle East is situated at the center of land and sea routes, thus occupying the juncture of Asia, Africa, and Europe. The region also has major maritime chokepoints critical to global oil and gas exports, such as the Strait of Hormuz, the Suez Canal, and the Bab el-Mandeb Strait. Therefore, the Middle East and the Gulf are central to China’s BRI, both strategically and economically, in its global engagement.

A 2025 report from the American Enterprise Institute shows significant growth in the value of construction contracting for Chinese companies in the Middle East and North Africa (MENA) from 2005 to 2024, particularly since the launch of the BRI. During that period, the combined value of China’s global investment and construction contracts worldwide exceeded US$2.5 trillion, with MENA accounting for US$280 billion.³⁰ With Saudi Arabia, for example, the total value of Chinese contracts from 2005 to 2012 was approximately US$11.3 billion; from 2013 to 2024, that figure increased to US$44.9 billion.³¹ In 2024, the trade volume between China and Iran reached US$13.37 billion, with China’s exports totaling US$8.93 billion and imports US$4.44 billion.³²

An important aspect of this trade is the use of national currencies instead of the dollar. In 2021, China’s renminbi settlements with BRI countries reached 5.42 trillion yuan (approximately US$763.4 billion), marking a 19.6% increase compared with the previous year. This growth included a 14.7% rise in the trade of goods and a 43.4% increase in direct investment settlements (Taylor 2025). For Iran, this trade path not only circumvents the sanctions imposed on it but also allows it to access financing from non-Western funds. As noted by Fulton and Schuman (2024, n.p.), the BRI “became a useful mechanism for Chinese private companies and state-owned enterprises to secure operational and funding support for a greater range of overseas projects. The BRI brand and promotion, as well as the PRC’s political motivation to use it to enhance China’s global standing, resulted in tangible outcomes, and governments in the region hungry for development, investment, and infrastructure were receptive.”

The economic and financial dimensions of the BRI in relation to Chinese foreign policy goals are well-documented in the literature (Qian and Fulton 2017; Ehteshami and Horseh 2018; Chaziza 2020; Wen and Chen 2022). Our purpose, however, is to highlight how China’s relationship with Iran, following its inclusion into the BRI in 2019, relates to China’s soft balancing strategy against the U.S. Xi first visited Iran in January 2016 and on that occasion elevated their bilateral relationship to a “comprehensive strategic partnership,”³³ besides signing three Memoranda of Understanding on “Jointly Promoting the BRI,” on “Reinforcement of Industrial and Mineral Capacities and Investment,” and another on “Strengthening of Investment Cooperation.” The status of a comprehensive strategic partnership carries specific and deliberate weight in Chinese diplomatic practice. It institutionalizes Iran’s place in China’s global strategy and opens pathways for deeper cooperation across a wide range of sectors, such as energy, infrastructure, digital technology, financial coordination, defense dialogue, and regional diplomacy.

In 2020, it was announced that a 25-year Sino-Iranian partnership would entail US$400 billion in Chinese investment in Iran’s energy, infrastructure, and manufacturing sectors. Iranian officials affirm that the agreement came into effect in January 2022.³⁴ According to the EIA, in 2022 and 2023, around 90% of Iranian oil exports were destined to China and settled in renminbi.³⁵In the context of the 2026 U.S.-Israel war against Iran, Iran’s control of the Strait of Hormuz has led it to suggest that authorized commercial ships and oil tankers would need to pay a transit fee in renminbi, deepening Chinese-Iranian economic cooperation facilitated by Chinese currency.³⁶ Moreover, China and Russia vetoed Bahrain’s UNSC Resolution calling for the opening, through force if necessary, of the Strait, which can be seen as an institutional balancing from China’s perspective.³⁷

The current strengthening of relations between the two emerged after the 2015 signing of the JCPOA, through which Western powers attempted to re-engage with Iran after decades of suspicion and tension stemming from Tehran’s nuclear program. However, the U.S. withdrew from the Plan in 2018. It then started to engage in hostile acts against Iran, mainly through an oil embargo, freezing Iran’s reserves in international banks, imposing travel bans, and imposing trade and financial sanctions. Since China was directly involved in the negotiations that led to the JCPOA’s establishment, it opposed the U.S.’s actions. According to Garver (2018), there were seventeen meetings between the Chinese and the Iranians leading up to the Plan, with China promising to invest in the country contingent upon Tehran’s acceptance of the agreement.

The U.S. withdrawal and the “maximum pressure” that accompanied Trump’s foreign policy towards Iran, which included the assassination of General Soleimani in 2020, have put China in a delicate position, as it struggles to preserve its partnership with Iran—demonstrating that it is Tehran’s most reliable partner—without deteriorating relations with the U.S. In 2020 and 2021, China concluded several agreements with Iran on energy, infrastructure, mining, and agriculture, which may be viewed as a way to circumvent the U.S. sanctions (Papageorgiou et al. 2023). China saw Washington’s posture as “reckless unilateralism that undermined the preferences of other signatories, and also as triggers that would lead to a less stable region, ultimately threatening their interests” (Fulton and Schuman 2024, n.p.).

In addition to its goal of enhancing economic and financial ties with Iran, China aims to strengthen its geopolitical presence in the Gulf (Saleh and Yazdanshenas 2024). Politically, Iran turned into a preferential target of Washington’s media and political campaigns against terrorism and nuclear proliferation. Following the September 2001 attacks on the World Trade Center and the Global War on Terror, the United States has regarded Iran as a state that sponsors terrorism. For this reason, it is classified, along with Iraq and North Korea, as part of the “Axis of Evil.” In this scenario, China seeks to mitigate Tehran’s exclusion from the liberal international order by integrating it into the BRI and the SCO. In a multiplex regional order in which the U.S.’s hegemonic position has been called into question, a comprehensive strategic partnership with Iran aligns with China’s interests in diminishing American primacy. Unlike other Gulf states, Iran is the only one without military ties to Washington.

Another dimension of the comprehensive strategic partnership between China and Iran involves security-diplomatic signaling. Although China is not yet a security provider in the Gulf, it is not neutral in regional rivalries. Instead, China tends to prioritize relations with its partners, and that explains why it has gradually expanded its security cooperation with Iran. The two countries have been collaborating on joint training exercises, intelligence sharing, counterterrorism efforts, and combating trafficking and transnational crimes. In 2017, 2019, and 2025, China participated in trilateral naval exercises with Iran and Russia in the Gulf of Oman and the Indian Ocean.³⁸ While these drills are limited in scale and do not target any specific country, they convey a message of strengthening security cooperation among them.

For instance, as for the 2026 U.S.-Israel war against Iran, Iranian military documents show that Chinese spy satellites, purchased by Tehran in 2025, provided the Islamic Republic with a fundamental resource to target U.S. military bases across the Middle East. Reports suggest that Iranian missile and drone systems were integrated within China’s BeiDou navigation satellite systems for position, targeting, and timing functions.³⁹ Moreover, over the last two years, Chinese firms exported to Iran many industrial, electronic, and chemical materials that were used to manufacture its military technology, including the drones.⁴⁰ So, China’s dual-use technology supply and alternative navigation system suggest an intention for constructing an enabling architecture that keeps Iran’s military-industrial base functioning even under extreme conditions.

Ultimately, these political-economic moves may challenge the perception of American strategic monopoly in the Gulf and signify China’s willingness to engage selectively in visible, yet not well-defined, forms of defense diplomacy with its partners. Following a 2022 official visit to China by six Middle Eastern foreign ministers, along with the GCC Secretary General, Chinese Foreign Minister Wang Yi spoke with local media, highlighting that the Middle East “is suffering from long-existing unrest and conflicts due to foreign interventions [...] We believe the people of the Middle East are the masters of the Middle East. There is no ‘power vacuum,’ and there is no need of ‘patriarchy from outside.’”⁴¹

Within the security-diplomatic aspect of the comprehensive strategic partnership between the two, in July 2023, Iran officially became a full member of the SCO, a status Tehran has aimed for since 2008.⁴² The SCO’s origins date to the 1990s, with the formation of the “Shanghai Five,” comprising China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan. This initial grouping primarily focused on addressing post-Cold War border demilitarization and fostering confidence-building measures in Central Asia. In 1996, they signed the “Shanghai Agreement on Confidence Building in the Military Field in the Border Area,” followed a year later by the “Agreement on Mutual Reduction of Military Forces in the Border Areas.”⁴³ Its formal transformation into the Shanghai Cooperation Organization in 2001, marked by the inclusion of Uzbekistan, broadened the Organization’s goals to encompass comprehensive regional security and stability. On the occasion of Iran’s official admission to the SCO in 2021, President Raisi affirmed that “The world has entered a new era,” meaning that “Hegemony and unilateralism are failing. The international balance is moving toward multilateralism and redistribution of power to the benefit of independent countries.”⁴⁴

While the SCO may not explicitly define itself as “anti-Western,” its emphasis on “non-hegemonic values” and “non-intervention” challenges the normative underpinnings of the U.S.-led liberal international order, mainly by keeping the U.S. out of Central Asia (Grajewski 2023). Iran’s full membership enhances China’s diplomatic leverage in the Gulf, allowing Beijing to engage with a key regional power that is actively seeking to counter Western influence in the subregion. In the context of Iran’s ongoing efforts to reduce its international isolation, the SCO plays a role in Tehran’s efforts to strengthen security relations with neighboring countries and engage in non-Western institutions.

Even though China did not militarily support Tehran during the “12-Day War”, the months that followed provided important insights indicating that China continues to court Iran as its main geopolitical partner in the region. In June 2025, the two countries reaffirmed their “strong commitment” to implementing the 25-year Strategic Cooperation Agreement.⁴⁵ In September 2025, Iranian President Masoud Pezeshkian held a bilateral meeting with President Xi on the margins of the Tianjin SCO summit, during which they reiterated their pledge to deepen their strategic partnership and announced the intention to accelerate bilateral projects ranging from infrastructure to digital communications.⁴⁶ On that occasion, the SCO issued a statement condemning Israel’s attacks.⁴⁷ Iran’s first participation in the SCO counterterrorism drill occurred in December 2025, signaling its ambition to be seen as a relevant regional player.⁴⁸ Therefore, Iran’s integration into the SCO formalizes a critical node in China’s soft balancing strategy against the U.S., bringing Tehran closer to Beijing through an institution that helps it bypass the U.S.’s efforts to isolate and sanction it, while also signaling a willingness to foster collective security structures against Western unilateralism.

It is also important to establish a link between economic and geopolitical interests related to Chinese foreign policy through the BRI and the SCO. While the SCO serves China’s geopolitical goals in the Gulf by fostering an institution that helps to reorient regional states away from exclusive Western influence (Niblock 2018), the BRI complements these efforts by entangling countries in a web of economic and financial interdependence, leaning towards Beijing’s presence in the region. To a great extent, the SCO serves as an instrument for China to engage with Gulf countries on sensitive issues, such as terrorism and separatism, while strengthening security ties through military drills, intelligence sharing, and other means, without committing troops on the ground or becoming involved in local conflicts.

Final remarks

China’s foreign policy strategy towards the Gulf reveals an approach of economic expansion and diplomatic engagement aimed at challenging U.S. regional hegemony, primarily through non-military means. Rather than seeking to supplant the U.S. as the region’s predominant security actor, Beijing has opted for a soft balancing approach, prioritizing economic interdependence, infrastructure investment, and strategic partnerships with key regional powers, particularly Iran. This strategy contrasts sharply with the U.S.’s long-standing pattern of military interventionism and security alliances in the region.

As demonstrated throughout this article, three key dimensions define China’s engagement with Iran: the establishment of a comprehensive strategic partnership; diplomatic mediation between Iran and the Saudis; and the deepening of trade relations, investment flows, and geopolitical partnership through Iran’s integration into the BRI and the SCO.

Nonetheless, this geopolitical and economic-centric model of engagement does not constitute a full-spectrum challenge to U.S. regional dominance. Washington continues to maintain an undisputed military hegemony in the Gulf, underpinned by a vast network of military bases and security commitments, as well as long-standing strategic partnerships, particularly with Israel and key Gulf monarchies. The post-October 2023 escalation of violence, the ongoing genocide in Gaza, and the “12-Day War” have further entrenched the United States’ role as the leading military actor. So, the endurance of U.S. hegemony, particularly in times of heightened insecurity, highlights the structural constraints on China’s strategic reach. Still, by embedding itself economically and diplomatically across the Gulf, China may be laying the foundations for a long-term transformation of the regional order—one that may not displace U.S. hegemony, but certainly complicates and redefines its future contours. In this sense, China’s soft balancing strategy towards the U.S. does not signal a revisionist posture, but rather a foreign policy aimed at carving out strategic space within a U.S.-dominated security order, thereby challenging the maintenance of the current status quo.

Further research on this topic should include analysis of how China’s soft balancing strategy may or may not be challenged by the military confrontations in the Middle East, i.e., if China would assume a more assertive position in light of U.S. military primacy in the Gulf, and what would that mean for the regional order, in particular, and the global order, in general.

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• Data Availability Statement
  There is no data associated with this article.
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• Associate Editors:
  Haroldo Ramanzini Junior (https://orcid.org/0000-0001-7105-6237) and Wilton Dias (https://orcid.org/0000-0002-9623-0526).

• Scientific Editors:
  Haroldo Ramanzini Junior (https://orcid.org/0000-0001-7105-6237) and Wilton Dias (https://orcid.org/0000-0002-9623-0526).

Data availability

There is no data associated with this article.

Publication Dates

• Publication in this collection
  27 July 2026
• Date of issue
  2026

History

• Received
  21 Jan 2026
• Accepted
  18 May 2026