How Do International Conflicts Impact China’s Energy Security and Economic Growth? A Case Study of the US Economic Sanctions on Iran

Abstract

International conflicts cause global energy price fluctuations and supply disruptions, which can threaten energy security and economic growth in energy-importing countries, including China. However, the implications and impact mechanisms of international conflicts on the energy security and economy of oil-importing countries have been poorly explored. Using US economic sanctions on Iran as a case, a global energy-extended computable general equilibrium model, GTAP-E, is employed to assess the impacts of international conflicts on China’s energy production, trade and supply, sectoral outputs, and economic growth. The results indicate that the USA–Iran tension would threaten China’s energy security, mainly due to the instability of the energy supply and the consequent upsurge of energy prices. However, if increased oil exports from other Persian Gulf countries compensate for the global oil supply shortages, China’s energy supply would be generally assured. Moreover, because of the close energy cooperation links between Iran and China, the sanctions could decrease the Chinese outputs of non-energy sectors and economic growth. Nevertheless, compared with sole-sanction situations, the results from a possible USA–Iran tension escalation, going as far as Iran’s closure of the Hormuz Strait, could pose a more serious risk to China’s energy security and economic growth.