If the US lifts its sanctions on Iranian oil, it could affect one of the lesser-known factors behind China’s competitiveness: its ability to purchase Iranian oil at discounted rates, as sanctioned countries often offer lower prices to those willing to navigate the associated risks.
The shift would primarily affect China’s independent refineries, but consequences may extend to Europe, exposing how energy shocks abroad can reshape global innovation flows, and testing the EU’s efforts to achieve greater technological resilience.
Independent Chinese refiners, known as “teapots,” accounted for 77 per cent of Iran’s crude exports this year, Reuters reported on May 19. These smaller players benefit from steep discounts offered by Tehran, whose sanctioned oil cannot enter most formal markets.
If Washington moves ahead with lifting restrictions as part of a renewed nuclear deal, Iran could redirect its exports, leaving these teapots without a viable supply, and potentially pushing them out of the market altogether.
While this story has been framed as a commodity market adjustment, its implications may go further.
The teapots provide energy inputs to several of China’s emerging tech-intensive sectors, including AI development and high-volume battery manufacturing. Their collapse could lead to higher domestic energy costs, tightening margins in industries that rely on cheap abundant energy to scale compute and production.
A May 20 study by the Brussels-based Bruegel Institute underscores how critical technologies are often supported by what it calls “spill overs” — indirect enablers like infrastructure, low-cost inputs, and talent migration.
The study compares the innovation ecosystems of China, the US, and the EU, and concludes Europe is comparatively more exposed to disruptions outside its control, especially when upstream supply chains are involved.
The US is reportedly engaged in negotiations with Iran aimed at easing tensions between the two countries.
President Donald Trump has a strong political incentive to push oil prices down, as lower energy costs help offset the inflationary effects of his tariff-heavy trade agenda.
This strategy has already been visible in Trump’s recent outreach to Saudi Arabia, as reported by Belgian bank ING and Washington-based think tank CSIS.
President Trump appears to be leveraging a familiar transactional model: promising large-scale contracts in exchange for increased oil production.
The Saudi government reportedly responded by signalling openness to boosting supply, a move that would put further downward pressure on global oil prices.
Reports also mention a diplomatic gesture from Qatar, including the offer of a private jet, illustrating the broader Gulf engagement around this energy pivot.
These global realignments coincide with a broader trend identified by Brussels-based Egmont Institute in a separate study on strategic tech diplomacy.
It describes a “gilded triangle” linking Silicon Valley, Saudi capital, and US political leadership, where private and state interests intersect to shape not only energy flows but also investment strategies in key technologies.
The study argues this informal alliance is already influencing how innovation and infrastructure are distributed globally.
For Europe, the combination of these developments raises enormous concerns.
While energy security has been a long-standing priority, its connection to digital and industrial competitiveness is less clearly defined in current policy frameworks.
The EU Chips Act seeks to reduce dependency on non-European semiconductor production, but these recent studies suggest that energy access, raw materials, and geopolitical alignment still remain under-addressed in resilience planning.
The Bruegel study underlines that the US still maintains the competitive edge in critical technologies.
This is due to its strong innovation ecosystem, substantial public and private investment in research and development, and an integrated approach to managing spill overs across sectors—factors that together sustain the US’s technological leadership amid global competition.
