China’s Iran Strategy After the 60-Day US-Iran Deadline: What Happens Next?

On Monday, August 17, 2026, the 60-day deadline for the Islamabad Memorandum of Understanding (IMOU) between the United States and Iran expired without a final agreement or a joint declaration of its extension, as stipulated in the memorandum. This has led to conflicting reports regarding the agreement’s fate, following the stalled implementation of its provisions and escalating tensions between Washington and Tehran. Consequently, numerous questions arise concerning the potential scenarios: Will the deadline be extended, or will there be a new escalation, and what will be the consequences? This situation has sparked a crisis, with Iran denying the existence of a binding deadline and accusing Washington of violating its terms and escalating tensions in the Strait of Hormuz. Several possible scenarios and consequences of breaching this agreement, known as the Islamabad Memorandum of Understanding, remain, including the potential for a war of attrition and continued US economic pressure and restrictions on navigation against Tehran, without a full-scale military confrontation.  With the possibility of opening the door to indirect diplomacy, meaning that negotiation channels remain open through Oman and Qatar without a swift nuclear resolution, this remains contingent on enduring further pressures and consequences related to the increased energy costs and reduced shipping traffic in the Strait of Hormuz while the situation remains at a standstill. Herein lies the Chinese position should the escalation against Iran resume: Beijing would continue providing unwavering economic support to Iran, while China would continue importing Iranian oil to mitigate the effects of the American sanctions. Furthermore, there is the scenario of Beijing adopting a policy of pressure neutrality, meaning that Chinese diplomacy would advocate for de-escalation and the protection of Asian energy supply lines, while simultaneously rejecting American hegemony. Beijing would then exploit the crisis to undermine the unilateral American sanctions imposed on Iran and strengthen its strategic presence.

In this context, Chinese intelligence circles analyze the expected consequences of the expiration of the 60-day deadline for the Islamabad Understanding between the United States and Iran without a final agreement or official extension, stating that this would put the entire region and the Gulf on the brink of a renewed confrontation amid an exchange of accusations and a slowdown in maritime traffic in the Strait of Hormuz. Given these circumstances, Chinese intelligence circles are interpreting the situation through a number of scenarios and positions, including China’s expectation of a prevailing war of attrition scenario, a state of neither war nor peace. This scenario, favored by Chinese assessments, anticipates a continuation of the status quo, avoiding both a full-scale war and a political settlement. Limited skirmishes are expected to persist, along with the use of economic and naval pressure tactics to buy time and test military readiness. Chinese intelligence, military, political, and strategic circles also anticipate the possibility of continued open-ended maritime escalation, particularly after the complete collapse of understandings and the return of direct confrontation between the United States and Iran. This confrontation is manifested in the targeting of shipping lanes and oil facilities in the Strait of Hormuz, threatening to disrupt global energy supply chains. Those concerned in Beijing expect to maintain a gray diplomatic intervention role, with regional mediators such as Pakistan, Qatar, and Oman attempting to keep back channels active to impose a new de facto truce without a formal declaration. Here, China’s official position in the event of renewed escalation between Washington and Tehran would be to pursue a policy of active strategic neutrality, avoiding direct military involvement and focusing on protecting its economic interests and ensuring the flow of Iranian oil through mechanisms that circumvent sanctions. This would be coupled with diplomatic pressure against American hegemony, utilizing multilateral international platforms such as BRICS, the Shanghai Cooperation Organization, and the UN Security Council to condemn any unilateral American escalation or blockade against Tehran, deeming it a threat to international peace and security. China would also maintain alternative economic and political mediation mechanisms, while simultaneously offering an indirect economic support package or strengthening its strategic partnership with Iran to prevent the collapse of the Iranian regime under the weight of American economic isolation. Furthermore, China would coordinate with regional actors to contain any shocks in energy markets.

Chinese intelligence and military think tanks analyze the dimensions of the US escalation against Iran, which aims to exert economic pressure. This involves the Trump administration’s pursuit of Iranian financing networks and entities and companies in China and the Gulf that help Tehran circumvent oil sanctions. Furthermore, the US is expected to exert increased military and naval pressure, leading to rounds of maritime tension, blockades, and restrictions on Iranian ports and shipping amidst the stalled efforts to reach a comprehensive final agreement. Herein lies the nature of China’s position: protecting Iran’s economic interests. China will continue to purchase Iranian oil, relying on circumvention networks and sanctions, such as the shadow fleet, to secure its energy needs without directly confronting US sanctions. China will also continue its mediation and diplomatic role, with the Chinese Foreign Ministry consistently calling for de-escalation and a return to political negotiations, rejecting the US and Israeli military option against Tehran. China will pursue a (policy of strategic balancing), maintaining strong communication channels with Washington and the Gulf states alongside its strategic relationship with Iran, thus granting it a degree of quiet influence behind the scenes.

China’s strategic objectives will be to capitalize on this unilateral US approach against Iran by attempting to influence the international order. China will advocate for a shift from a US-led unipolar system to a multipolar international order to safeguard its economic interests and secure oil supplies from Iran at reasonable prices, free from the constraints of US sanctions. China will also work to strengthen its counter-alliance strategy by building a unified diplomatic front that brings together Beijing, Moscow, and Tehran to deter US policies. China will also rely on several diplomatic mechanisms, such as the BRICS group, expanding its membership to reduce dependence on the dollar and provide an economic safety net for countries subject to Western and US sanctions. Furthermore, China will work through the Shanghai Cooperation Organization (SCO) to enhance security and political coordination among Asian countries to counter US military and strategic expansion. China will also utilize the UN Security Council, using its veto power in coordination with Russia to obstruct any escalatory Western or US resolutions against Tehran.

Accordingly, through these moves, Beijing aims to condemn unilateral sanctions and embargoes against Iran, support regional stability, and promote multilateral economic and political cooperation independent of US influence, due to US manipulation of the components of the agreement with Iran known as the (Islamabad Understanding).