China brought its oil imports from all sources down by 5 million barrels a day, by some estimates, and that is a large part of why six months of war with Iran has not produced the oil shock markets expected.
Washington is treating Chinese cooperation as something to be extracted, with the threat of sanctions on countries and companies that keep doing business with Iran. Meghan O'Sullivan's reading is that Beijing already holds the more useful lever, because what China does to its own demand sets the price American drivers pay before they vote in November.
"So China has some leverage over an issue that is potentially even more important to President Trump than just how much oil China is buying from Iran."
O'Sullivan directs Harvard University's Belfer Center for Science and International Affairs and is a former deputy national security adviser, which is the job that decides how tools like these get combined.
I listened to the full segment so you can skip it.
Here are the 4 takeaways that matter.
👤 Guest: Meghan O'Sullivan, director of Harvard University's Belfer Center for Science and International Affairs and a former deputy national security adviser
🎙️ Host: Andrew Ross Sorkin, co-anchor of CNBC's Squawk Box and the founder of its DealBook franchise
📰 Published: 1 September 2026 on CNBC (Squawk Box)
🔴 YouTube | 🔗 Episode page | ⏱️ 8 min
Key Takeaways
The war has no endgame in sight, and the reason is that nobody has set the goal Sanctions, military force and talk of diplomacy are all running at once without a strategy joining them
New sanctions have not moved Iran, and the drop in Chinese buying is not evidence that they have Iran cannot export the oil in the first place, which she says explains most of the fall
China's 5M barrel-a-day cut in imports is what kept oil prices manageable Traders had been pricing the possibility of oil at $200
Demand restraint is now a second way to manage an oil crisis, and only China can do it The old move was to ask Saudi Arabia to pump more
Containment, not regime change or a deal, is the option she would take She says the historical record does not support the idea that more economic pressure makes regime change likelier
1. No End, Only More Chapters
Sorkin opened with the question the show has been asking for six months: how does this end, and are we any closer than we were?
O'Sullivan said the conflict is nowhere near finished. "Well, to answer that directly, Andrew, I would say we're not close to the end here. It's clear there are many more chapters."
What she said is confusing markets, investors and consumers is the use of military force and the threat of more of it, coming a week after the Treasury Secretary said the United States was pivoting from military strikes to economic pressure She does not read those two as a contradiction
The defect she named is not the mix of tools but the absence of a goal to point them at. Sanctions, military force and the Iranians talking about diplomacy are all in play, and none of it has been brought together into a strategy
"And until that happens, we are going to continue to lurch from escalation to escalation."
2. Sanctions Have Not Bitten
Sorkin asked whether the economic sanctions now in place are having a meaningful impact yet.
Her answer was flat. "No, I wouldn't say that any new economic sanctions have had a major impact."
Some people would like to say the threat of sanctions is changing China's behavior, and it is true that Chinese buying of Iranian oil has fallen. "And it is true that China has decreased its importation of Iranian oil, which of course, is a very big economic issue for Iran." She attributes the fall mostly to the embargo and to the fact that Iran cannot export its oil, rather than to Chinese fear of American sanctions
What is actually happening, she said, is what the Treasury Secretary described a week earlier: a warning shot, with the administration signaling it will go after countries and companies starting or continuing business with Iran. A number of companies and entities have been targeted
Raising the pressure to a new level would require other countries, and primarily China, to join. That means either diplomacy, which she said has failed so far, or the threat of secondary sanctions, which carries real risks two weeks before a summit in Washington between President Xi and President Trump
The purpose decides whether pressure is even the right tool. "And if it is regime change, actually, the historical record doesn't show that more economic pressure increases the chances of regime change" If the aim is a deal, she said other things matter more than additional pressure If the aim is containment, multilateral pressure is the most important thing, and that runs through Beijing
3. China Cut 5M Barrels a Day
Sorkin raised the Treasury Secretary's description of this as an economic D-Day and asked how the coming Trump-Xi meeting plays out, and where Iran ranks against tariffs and artificial intelligence on that agenda.
O'Sullivan split China's role in the oil market into two pieces. The first is the one the administration talks about: China is not buying Iranian oil, because Iranian oil is not reaching global markets
The second piece is the one she said the administration has not talked about, and it is the reason the last six months were manageable. "A very big one of which is that China reined in the amount of oil it was importing from all sources, brought down their imports by 5 million barrels a day, by some estimates, and this helped keep the price of oil manageable." "In a world where many people thought the price of oil could go up $200."
Managing an oil crisis used to mean asking a producer to pump more. "It used to be you would just go to riyadh during an oil crisis and ask the saudis to pump more oil." Reining in demand is now a second way to do it, and China is the country that can
That inverts the leverage the president thinks he is carrying into the meeting. If he believes he pressured Beijing into buying less Iranian crude, O'Sullivan said, he will think he has more leverage than he does Chinese demand is what moves the global price, and the price at the pump, before American voters go to the polls in November
"So China has some leverage over an issue that is potentially even more important to President Trump than just how much oil China is buying from Iran."
4. Containment Is the Answer
Sorkin put it to her that she was painting a skeptical picture of any positive outcome soon, and asked what she would tell the president to do.
Her recommendation runs through China first. If the administration treats severing Chinese economic ties with Iran as one of its highest priorities and is willing to use secondary sanctions to force compliance, the best available option is a strategy of containment of the Iranian regime
She was explicit that containment is the unglamorous choice. "It's not as dramatic as regime change, or it's not as hopeful as getting to some kind of long term deal, which I'm deeply skeptical about." "I think the iranians would be happy to talk at some point, but probably not happy to make a credible long term deal."
The time horizon is years, not months. "So containing this regime for potentially years and waiting for something to happen to make a different kind of strategy more feasible seems to be the way to go."
Containment as she described it has two parts: economic pressure that is multilateral, and the smart use of military force, rhetoric and other tools The objective is to stop the regime destabilizing the region and the oil market over the long haul, not to resolve the crisis quickly
Bonus Insights
The segment was framed at the top by the president's promise of more military action against Iran, after the United States and Iran traded strikes over the weekend and the day before
Sorkin's own framing of the Iran file was as one piece of an extremely complex relationship with China, alongside tariffs and artificial intelligence, and he asked how the administration would rank them. O'Sullivan's answer was that the oil-demand question should sit higher on the agenda than the Iranian crude question
She described China as having become "another pole in the global tent of managing oil crises," which is the frame behind everything else she said about leverage
O'Sullivan's bottom line is that the United States has assembled every instrument of pressure and no objective to aim them at, and that the country it needs most is the one whose leverage it has misread.
Products, Companies & Tools Mentioned
Belfer Center for Science and International Affairs (The Harvard research center O'Sullivan directs, and the basis for her reading of how sanctions, force and diplomacy combine)
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