Continuity in Energy Strategy Amid U.S.–Iran War
Ethan Kessler
Executive Summary:
Energy diversification, stockpiling, and electrification cushioned the People’s Republic of China (PRC) from the 2026 Strait of Hormuz closure. Official and unofficial commentary treats this resilience as vindication of the energy security strategy pursued since the 14th Five-Year Plan (2021–2025).
Released soon after the June ceasefire, the “15th Five-Year Plan for the Construction of a New-Type Energy System” doubles down on the same three levers—import diversification fossil-fuel reserves, and non-fossil fuel capacity—with concrete commitments to expand overland pipeline capacity, stockpiles, and electrification.
Beijing’s reliance on stable energy flows from the Middle East, including Iran’s Arab neighbors, will endure for the near term. This helps explain the PRC’s limited support for Tehran during the war, a posture unchanged by the U.S.–Iran ceasefire’s collapse in early July.
On June 26, the State Council Information Office unveiled the energy component of the 15th Five-Year Plan. In many respects, it signaled continuity from the previous plan, despite its arrival amid “drastic fluctuations” (剧烈波动) in global energy markets following the outbreak of war between the United States and Iran in late February. As officials made clear, however, the ability of the People’s Republic of China (PRC) to weather those fluctuations was largely down to the previous plan’s focus on stockpiling, import diversification, and electrification (China News, June 26).
PRC officials and commentators have treated the war as a vindication rather than a warning. This verdict has remained unchanged following the war’s recent reignition in July. The PRC nevertheless remains substantially dependent on stable energy flows from the region, a fact reflected in Beijing’s continued, cautious diplomacy that seeks balance between Iran and the Gulf Arab states.
The 14th Five-Year Plan Holds Under Fire
Recent commentary from Party-affiliated media and academic researchers has characterized PRC readiness for the energy crisis resulting from the closure of the Strait of Hormuz as both impressive and incomplete. April coverage from China Energy News (overseen by the People’s Daily Press) is representative. It called the closure a “pressure test” (压力测试) for the PRC’s energy supply system and quoted an expert from the China International Carbon Neutrality Economic Research Institute as saying the system was under “short-term pressure, but manageable in the long term” (短期承压长期可控) (China Energy News, April 6). The PRC’s system has in fact held up. Following the Strait’s closure in March, the PRC drew down oil from prewar stockpiles that were more than twice the combined size of U.S. and Japanese stockpiles. It also further cut import demand by idling petroleum feedstock plants (U.S. Energy Information Administration, April 20). By June, analysts credited the country’s cut in crude imports and reduced refining activity as critical to offsetting the global supply shock, on par with Saudi rerouting and coordinated Western strategic reserve releases (CNBC, June 8). [1]
Electrification has supplied additional flexibility. According to the PRC’s National Energy Administration (NEA) and Ministry of Transport, over the May Labor Day holiday, electric rail passenger traffic rose by over four percent year-on-year; the share of electric vehicles (EVs) on the road was up a third from a year earlier; and EV charging volume was up by more than 50 percent (Ministry of Transport, April 28; Xinhua, May 7). Meanwhile, coal-fired generation rose by more than three percent year-on-year in May, providing an additional buffer (Centre for Research on Energy and Clean Air, June 18). NEA General Office Deputy Director Zhang Xing (张星) noted in an April press conference that Chinese coal spot prices increased by just 3.9 percent in the month after the start of the war—more than 10 percentage points less than global spot prices. This achievement underscores the “backstop role” (兜底保障作用) of domestically produced coal in the PRC’s energy mix (NEA, April 27).
Officials have credited the 14th Five-Year Plan’s energy strategy for this outcome. Three weeks into the Strait’s closure, Lin Boqiang (林伯强), a member of the National Development and Reform Commission’s (NDRC) Energy Price Consultation Committee, wrote that the crisis had demonstrated the energy strategy’s “foresight, stability, and resilience” (前瞻性、稳定性与抗风险能力) (Global Times, March 18). In April, the NEA’s Zhang Xing similarly credited the strategy with “ensuring the security of [energy] supply under various circumstances” (确保各种情形下的安全保供能力) (NEA, April 27).
The motivation for Beijing’s strategy emerged more than two decades ago. At the time, officials worried about the country’s hypothesized vulnerability to a U.S. blockade in the Strait of Malacca and other forms of energy disruption. These concerns were manifest in the 14th Five-Year Plan and its subsidiary “Plan for a Modern Energy System” (“十四五”现代能源体系规划), which included the goals of building the domestic portion of the PRC–Russia gas pipeline, constructing major oil reserve projects, and installing more ultra-high-voltage transmission capacity (China Brief, April 12, 2006, May 11; NDRC, March 2021, January 29, 2022). President Xi Jinping has underscored these goals on inspection tours, stating on one occasion that the PRC “must hold its energy bowl firmly in its own hands in order to develop the real economy” (要发展实体经济，能源的饭碗必须端在自己手里).
Since the war’s outbreak, Chinese commentaries have celebrated the PRC’s preparations for energy shocks (China Brief, March 31). This is not to say, however, that every aspect of the Iran war has been welcomed by PRC leadership. Beijing was likely not thrilled when Washington lifted longtime sanctions on Iran’s oil program, which allowed Tehran to market to more buyers instead of selling only to Chinese refiners at a steep discount (NYT, June 17). Iranian attacks on infrastructure in Saudi Arabia and the United Arab Emirates (UAE) will also hurt growth in major recipients of Chinese investment. And the Strait of Hormuz’s closure will cast a long shadow on the PRC’s economy, which took a hit from the closure of petroleum feedstock manufacturers and now faces overseas importers rocked by depressed demand (Center for Strategic and International Studies [CSIS], April 30). The consensus, however, is that pre-war policies of stockpiling, resource diversification, and electrification have paid off.
The 15th Five-Year Plan Doubles Down
The clearest signal of how Beijing has metabolized the war arrived after the June 17 ceasefire. On June 26, the State Council Information Office held a press conference on its newly issued energy plan, the “15th Five-Year Plan for the Construction of a New-Type Energy System” (新型能源体系建设“十五五”规划) (NDRC, June 25). NEA Director Wang Hongzhi (王宏志) told reporters that “international geopolitical conflicts continue to disrupt the oil and gas chain” (国际地缘冲突持续扰动油气供应链) and that the plan responds in three ways: by developing and storing fossil fuels, substantially increasing non-fossil supply, and strengthening the network of “energy cooperation partners” (能源合作朋友) (People’s Daily, June 27).
The plan starts with a summary main objective: to establish by 2030 a “clean, low-carbon, safe, and efficient new-type energy system” (建成清洁低碳安全高效的新型能源体系). This is followed by four primary quantifiable goals: raising total annual energy production to 5.8 billion tons of standard coal equivalent (tce); raising the share of non-fossil fuels in energy consumption to 25 percent; raising the share of wind and solar power in installed generation capacity to 50 percent; and raising the share of non-fossil fuel energy in power generation to 50 percent. The first and second of these goals are “binding” (约束性), while the goal pertaining to wind and solar capacity finds a proxy in the binding goal of reducing carbon intensity. The final goal is labeled as only “indicative” or “anticipated” (预期性) (NDRC, June 25).
Increasing domestic energy production while accelerating the shift toward non-fossil fuels remains essential for the PRC’s energy security goals because of the persistent gap between PRC energy demand and domestic energy supply. [2]Guidance for oil and liquefied natural gas (LNG) centers around the mandate to “stabilize oil, grow gas” (稳油增气). This is reflected in the new plan, which leaves its predecessor’s crude oil output goal unchanged. LNG’s supporting role in reducing carbon intensity and the difficulty of extracting ever more crude oil from mature or hard-to-access domestic sources explain the continued prominence of this mandate (Reuters, May 19; NDRC, June 25; WeChat/NEA, July 21).
Beyond production, it is notable that the 14th Five-Year Plan’s flexible-capacity target, which was set at 24 percent of generation capacity by 2025, was conspicuously absent from official August 2025 and June 2026 retrospectives. Those retrospectives instead reported that national energy production in 2025 (5.1 billion tce) overshot the official goal (4.6 billion tce), as did reported shares of both renewable energy power capacity (60 percent, versus a goal of 39 percent) and energy consumption from non-fossil fuels. Crude oil output hit a record high and both natural gas output and energy intensity reduction in 2025 exceeded official goals as well (NDRC, January 29, 2022; NEA, August 26, 2025; NBS, June 5).
Officials subtly acknowledged the challenge of “higher requirements for … safe and stable operation and flexible adjustment capabilities” (安全稳定运行和灵活调节能力提出更高要求) given rapid buildout of renewable energy capacity (NBS, June 5). This challenge is evident in growing national curtailment rates (the proportion of produced power not utilized) for both wind and solar power, demonstrating the PRC’s growing need for power absorption solutions amidst massive electrification gains (International Energy Agency, October 7, 2025; Global Carbon Zero, April 10). [3]
The latest plan stays broadly within the bounds the overarching energy strategy articulated by President Xi over a decade ago. In a speech outlining the “Four Revolutions and One Cooperation” (四个革命、一个合作), he sought to make energy consumption more efficient, increase domestic energy supply, and enhance international cooperation to ensure resilience (National People’s Congress, June 13, 2014). Like the previous plan, the new strategy still envisions non-fossil fuels comprising at least a quarter of energy consumption by 2030 (NDRC, January 29, 2022, June 25). Continuity is even clearer in the context of longer-term national energy goals, including the new plan’s aim for the PRC to double the 2025 non-fossil fuel share of energy supply by 2035, which is the deadline for “basically achieving socialist modernization” (基本实现社会主义现代化) (NDRC, March 23, 2021, April 17; People’s Daily, June 26).
The current crisis has revealed gaps in the PRC’s energy strategy that some argue require a wholesale reorientation, especially given Asian reliance on Qatar for LNG. There is no evidence, however, that Beijing has decided to revise the energy policy guidance it finalized before the closure of the Strait of Hormuz. One official at the China National Petroleum Corporation, for instance, recently stated that oil and natural gas will serve as a “ballast” (压舱石) and “stabilizer” (稳压器) during the transition to greater renewable energy use (The Paper, June 28). Existing initiatives to increase overland gas capacity and diversify sources of oil (including coal-to-oil production) remain top priorities in the plan, which sets the goal of 500 billion cubic meters in primary LNG pipeline transmission capacity (the PRC just having surpassed 400 billion cubic meters last June) and commits to expanding coastal LNG terminals and underground gas storage clusters (NEA, August 29, 2025; NDRC, June 25).
Beijing Balances Diplomatic Ties and Energy Security
The PRC’s interest in backing Tehran is tempered by Beijing’s energy and financial interests in the Gulf Arab states. PRC reluctance to extend substantial material aid or unqualified rhetorical support to Iran during the closure of the Strait is a reminder of this constraint, which is likely to endure beyond the current conflict given continued reliance on imported oil and LNG under the 15th Five-Year Plan.
Competing mandates to back Iran against the United States and Israel yet also to avoid the appearance of endorsing Tehran’s retaliatory actions across the region are clear in official statements (Financial Times [FT], June 15). In an April 15 call with Iranian Foreign Minister Abbas Araghchi, PRC Foreign Minister Wang Yi (王毅) called for respecting Iran’s sovereignty and security, then balanced this support with a thinly veiled swipe at Iran’s blockade (PRC Ministry of Foreign Affairs [MFA], April 15). This same stance has held through the ceasefire’s collapse. At a July 8 press conference, an MFA spokesperson stated that renewed conflict “does not serve any party’s interests” and that Washington and Tehran should implement the memorandum of understanding signed in June (MFA, July 8). A week later, an MFA spokesman reiterated this neutral stance, adding that “all relevant parties should meet each other halfway” (相关各方应相向而行) (MFA, July 14).
Positioning between Iran and the Gulf Arab states reflects the PRC’s desire to guard its economic interests in the Gulf and to see traffic in the Strait return to pre-war levels, while simultaneously maintaining political backing for Iran. In 2025, PRC two-way trade with Iran was less than 40 percent of that with Saudi Arabia or the UAE; and from 2013–2025, PRC entities’ investment in the UAE was triple that in Iran and five times that in Saudi Arabia. Beijing’s 2021 pledge in 2021 to invest $400 billion in Iran over 25 years, by contrast, is less certain today, given limited prospects in the highly sanctioned economy compared to its far more diversified neighbors (CSIS, April 30).
Beijing’s arms-length treatment of Iran is therefore likely to persist. Without it, Beijing risks an overconfident Tehran taking a more uncompromising stance in negotiations with Washington, which have gained more urgency after the ceasefire’s breakdown (Washington Post, July 9). This is also underscored by a near-total lack of mention in recent MFA statements of Lebanon—the issue cited by Tehran in its threats to re-close the Strait—and the reiteration of the PRC–Saudi comprehensive strategic partnership in a June meeting between the two countries’ foreign ministers (BBC, June 20; MFA, June 30). Most pointedly, Wang Yi has not called or met with his Iranian counterpart since June 22.
Conclusion
The PRC’s response to the U.S.-Iran war has been defined less by adaptation than by confirmation when it comes to energy security. Stockpiling, import diversification, and electrification lessened the initial shock of the Strait’s closure, which PRC officials have consistently credited that performance to a strategy set in motion with the 14th Five-Year Plan.
The 15th Five-Year Plan’s new energy blueprint, unveiled shortly after the war paused in June, extends core elements of this strategy. Beijing’s relatively evenhanded diplomacy toward Iran and the Gulf Arab states has proven equally durable. Party officials may yet signal adjustments to energy policy at the annual National Energy Work Conference in December, but the events of the war’s first four months suggest continuity is the more likely path.
This article originally appeared in China Brief. Check it out here!
Ethan Kessler was a 2025-2026 Boren Graduate Fellow for Mandarin Chinese. Before that, he worked at think tanks researching cross-Strait relations, global technology policy, and defense acquisition. He holds a master in public policy from the Harvard Kennedy School.
Notes
[1] Energy analysis firm FGE NexantECA estimated that the PRC’s crude imports in the second quarter of 2026 were down year-on-year by the equivalent of over a quarter of daily consumption in the month preceding the war. Analysts estimate that some of the demand loss will not return, accelerating the nation’s transition to greater electrification (Bloomberg, June 22).
[2] This gap disproportionately comprises crude oil and liquid natural gas (LNG), which together account for about three-quarters of the PRC’s net energy import volume despite only comprising around one quarter of its energy consumption (National Bureau of Statistics [NBS], 2025; NBS, June 5).
[3] Curtailment rates for wind and solar climbed from 5.7 and 5.4 percent, respectively, in December 2025 to 8.5 and 9.2 percent, respectively, in February 2026. Curtailment rates also increased by about 1.5 percentage points annually from 2023 to 2025.