Exclusive – Sources: China is pressuring Iran to curb Houthi attacks in the Red Sea

Written by Parisa Hafezi and Andrew Haley

DUBAI (Reuters) – Chinese officials have asked their Iranian counterparts to help curb attacks by Iran-backed Houthis on ships in the Red Sea, or risk damaging trade ties with Beijing, four Iranian sources and a diplomat familiar with the matter said.

The Iranian sources said that discussions about the attacks and trade between China and Iran took place during several meetings held recently in Beijing and Tehran, and refused to provide details about when they were held or who attended them.

“Basically, China is saying: If our interests are harmed in any way, it will affect our business with Tehran. So ask the Houthis to exercise restraint,” said an Iranian official familiar with the talks, who spoke to Reuters on condition. Anonymity.

The attacks, which the Houthis say support Palestinians in Gaza, have raised the cost of shipping and insurance by disrupting a major trade route between Asia and Europe that is widely used by ships arriving from China.

The four Iranian sources said that Chinese officials did not make any specific comments or threats about how trade relations between Beijing and Iran would be affected if its interests were damaged by Houthi attacks.

Although China has been Iran's largest trading partner over the past decade, its trade relations are unbalanced.

For example, Chinese oil refineries bought more than 90% of Iran's crude oil exports last year, according to tanker tracking data from trade analytics firm Kpler, as U.S. sanctions kept many other customers away and Chinese companies benefited from deep discounts.

However, Iranian oil only accounts for 10% of China's crude oil imports, and Beijing has a host of suppliers that can fill the gap from elsewhere.

The Iranian sources said that Beijing made clear that it would feel very disappointed towards Tehran if any ships linked to China were attacked or the country's interests were affected in any way.

But while China was important to Iran, Tehran also had proxies in Gaza, Lebanon, Syria and Iraq, along with the Houthis in Yemen, and its regional alliances and priorities played a key role in decision-making, one Iranian insider said.

In response to a request for comment on meetings with Iran to discuss the Red Sea attacks, the Chinese Foreign Ministry said: “China is a loyal friend of Middle Eastern countries and is committed to enhancing regional security and stability and seeking common development and prosperity.” “

She told Reuters, “We strongly support the countries of the Middle East in strengthening their strategic independence, uniting and cooperating to resolve regional security issues.”

The Iranian Ministry of Foreign Affairs could not immediately be reached for comment.

Axis of resistance

Military strikes launched by American and British forces on Houthi targets in Yemen this month failed to stop attacks on ships launched by the group, which controls a large part of Yemen, including the capital, Sanaa, and a large part of the country’s coast on the Red Sea at Bab al-Mandab. Strait.

The Houthis, who first emerged in the 1980s as an armed group opposing Saudi Arabia's Sunni religious influence in Yemen, are armed, funded and trained by Iran and are part of the anti-Western and anti-Israel “axis of resistance”.

A senior US official said Washington had asked China to use its influence with Iran to persuade it to rein in the Houthis, including in talks that Secretary of State Antony Blinken and National Security Advisor Jake Sullivan held this month with senior Chinese Communist Party official Liu Jianchao.

A senior Iranian official said that while Chinese officials discussed their concerns extensively in the meetings, they never mentioned any requests from Washington.

On January 14, Chinese Foreign Minister Wang Yi called for an end to attacks on civilian ships in the Red Sea — without naming the Houthis or Iran — and for the preservation of supply chains and the international trading system.

Victor Gao, a professor at China's Suzhou University, said that China, as the world's largest trading nation, was disproportionately affected by the shipping disruption, and restoring stability in the Red Sea was a priority.

But Gao, a former Chinese diplomat and adviser to oil giant Saudi Aramco, said Beijing would regard Israel's treatment of the Palestinians as the root cause of the Red Sea crisis and would not want to openly blame the Houthis.

A US State Department spokesman declined to comment when asked about bilateral discussions between Iran and China on this issue.

A diplomat familiar with the matter said that China had been talking with Iran about the issue, but it was unclear how seriously Tehran was taking Beijing's advice.

Two officials in the Yemeni government, an enemy of the Houthis, said they were aware that several countries, including China, had sought to influence Iran to rein in the Houthis.

Analysts Gregory Brough of the Eurasia Group and Ali Fayez of the International Crisis Group said China has potential leverage over Iran because of its oil purchases and because Iran hopes to attract more direct Chinese investment in the future.

However, both said China has so far been reluctant to use its influence, for several reasons.

“China prefers to take advantage of the United States protecting freedom of navigation in the Red Sea by shedding blood for the Houthis,” Fayez said, adding that Beijing also realizes that Iran does not have complete control over its Yemeni allies.

The effect is not absolute

Houthi spokesman Mohammed Abdul Salam said on Thursday that Iran has not yet conveyed any message from China about reducing attacks.

He added, “They will not inform us of such a request, especially since Iran's declared position is to support Yemen. It condemned the American-British strikes on Yemen, and considered Yemen's position honorable and responsible.”

The four Iranian sources said it was unclear whether Iran would take any action after discussions with Beijing.

The risks are high for Iran because China is one of the few powers capable of providing the billions of dollars in investments that Tehran needs to maintain the capacity of its oil sector and keep its economy afloat.

China's influence was evident in 2023 when it facilitated an agreement between Iran and its regional rival Saudi Arabia to end years of hostilities.

However, an Iranian insider said that although there were strong economic ties between China and Iran, Beijing's influence on Tehran's geopolitical decisions was not absolute.

Some within Iran's ruling establishment have questioned the value of the partnership with Beijing, pointing to the relatively low volume of non-oil trade and investment since China and Iran signed a 25-year cooperation agreement in 2021.

Iranian state media says Chinese companies have invested just $185 million since then. State media also said last year that Iranian non-oil exports to China fell by 68% in the first five months of 2023 while Iran's imports from China rose by 40%.

On the other hand, Chinese companies committed last year to invest billions in Saudi Arabia after the two countries signed a comprehensive strategic partnership in December 2022.

Two Iranian insiders said that although China cannot be ignored, Tehran has other priorities to consider, and that its decisions are shaped by a complex interplay of factors.

“Regional alliances and priorities as well as ideological considerations contribute significantly to Tehran’s decisions,” one person said.

The second person said that Iran's rulers must adopt a careful strategy when it comes to the Gaza war, as well as the Houthi attacks, and that Tehran will not abandon its allies.

The Iranian sources said that Iran's role as the leader of the “axis of resistance”, which includes the Houthis, Lebanese Hezbollah, Hamas, and armed factions in Iraq and Syria, must be balanced while avoiding being drawn into a regional war over Gaza.

One person said that Tehran's messaging to and around the Houthis requires a degree of deniability about the extent of its control over them, but it also requires the ability to claim some credit for their anti-Israel actions.

(Additional reporting by Parisa Hafezi in Dubai and Andrew Haley in Beijing; Additional reporting by Samia Nakhoul in Dubai, Trevor Hunnicutt, Humeyra Pamuk, Arshad Mohammed and Matt Spitalnick in Washington, Mohammed Al-Ghobari in Aden and Greg Torode in Hong Kong; Writing by Parisa) Hafezi; Editing by Estelle Shirbon and David Clarke)