The Donald Trump administration’s determination to squeeze Iran economically after withdrawing from the nuclear deal is already succeeding on one front: frightening European investors out of making deals with Tehran. Yet Iran’s leadership thinks it has a secret weapon: to use Chinese investment and oil purchases as a way to compensate for the loss from the West. Given China’s high energy needs and the trade war now on between Washington and Beijing, this may seem a realistic scenario. But it’s almost certainly a fantasy: While China can indeed take some of the sanctions heat off Iran, it is neither able nor willing to be Tehran’s economic savior. For the Iranian government, the situation is getting critical: The currency has now dipped to perhaps an all-time low on unofficial markets of 90,000 rials to the dollar — less than half its value at the beginning of this year. Last weekend saw the largest public protests in Tehran since 2012. And US sanctions won’t actually be reinstated until August. To make matters worse, OPEC’s decision last week to increase oil production — a move Trump supported — places more economic pressure on Iran. The country is in no position to increase production, due to both pending US sanctions and its creaky infrastructure, and now that the price of oil will certainly dip, what petroleum it does sell will bring in much less desperately needed hard currency. But is the Plan B on China enough to get Iran out of a severe economic crisis? There is extensive debate in Washington over this question. New US sanctions will not affect the Chinese private sector to the same degree as they likely will the Europeans. But as Iran’s options become more limited, it is clear that Chinese investment, exports and oil purchases can only help the Iranians so much. First, recall that after the US pulled out of the nuclear deal this spring, Iran turned to Europe. In an effort to keep the pact alive, European Union officials have encouraged companies to keep trading with and investing in Iran. Europe’s governments have offered to grant special business waivers and seek US exemptions for companies doing business with Tehran. Yet European companies are not listening. On the investment front, the PSA Group (maker of Citroen and Peugeot cars) is the most recent firm to buckle, shutting down planned joint ventures with two Iranian auto manufacturers. On the oil side, French giant Total says it will cancel a multibillion-dollar deal with Tehran unless it receives a special sanctions waiver from the US, which is unlikely. Nearly a dozen other European firms have also canceled or suspended trade and investment deals with the “Islamic Republic.” Its true that Iran and China already enjoy a robust relationship. After the nuclear deal was signed in 2015, Chinese President Xi Jinping agreed on a wide-ranging 25-year plan to broaden relations. This included increasing bilateral trade by tenfold, to $600 billion, in the next decade. China also has the option, for example, to take over the canceled Total deal. But many experts believe that Chinese investment cannot compensate for what Tehran will lose from the West. For example, to effectively rehabilitate its oil infrastructure and reduce production costs, Iran will need to import advanced technology available only in Europe and the US. As Daniel Glaser, who enforced sanctions and counterterrorism efforts at the US Treasury for two decades, explained to me: “Chinese technology is simply not as good as Western technology with respect to exploration and extraction, so the reliance on the Chinese for this would place the Iranians at a huge competitive disadvantage.” In addition, some expected Chinese investment may fail to materialize. Larger Chinese companies and banks that have an interest in doing business in the US or transacting business in dollars will be just as deterred from dealing with Iran as the European firms. The so-called extraterritoriality of US sanctions applies to any firm, including Chinese companies, carrying out transactions in US dollars, even if these transactions are with non-US firms or branches. The Treasury has announced that there will be deadlines before sanctions on Iran are fully imposed. The first deadline, Aug. 6, will affect any purchase of US dollars, trade in gold and certain other metals, aviation and the motor vehicle industry. Major Chinese corporations cannot afford to bypass these restrictions. As for the lifeblood of Iran’s economy, oil exports, Tehran is going to need to find alternative markets. When US sanctions were in effect, Iran’s production dipped from nearly 4 million barrels a day in 2010 to 2.5 million barrels per day in 2013, according to the Central Bank of the “Islamic Republic.” Once sanctions were lifted in 2016, after the nuclear deal was signed, production climbed back to nearly 4 million barrels a day. Iran’s gross domestic product also grew from 3 percent to 12 percent after sanctions were lifted. At present, Iran exports approximately 2.62 million barrels of this crude oil per day. Approximately 38 percent of these sales are to European companies, according to the Financial Tribune, an Iranian economic publication. Even if Europe doesn’t “snap back” the heavy sanctions it enforced on Iranian crude before the nuclear deal was reached, there is no question that its imports will shrink. Iran may be able to make up for some of the loss by selling additional barrels to China (before the nuclear deal was signed, it shipped just under 1 million barrels per day to Asia). But in any negotiation with the Chinese, Tehran’s lack of viable alternatives would put it at a clear disadvantage. "If Iran is offering discounted oil or preferential investment opportunities, China will seek to take advantage," said Glaser. "China is not going to alter its long-term energy strategy or become overly reliant on Iranian oil based upon a short-term diplomatic dispute." A reduction in oil sales would lead to a decline in Iran’s foreign currency reserves and make it difficult for Tehran to meet its balance of payment obligations. There is additional domestic pressure from Iran’s hard-liners to withdraw completely from the deal, which would serve the interests of the Revolutionary Guard Corps. The IRGC is deeply rooted in Iran’s economy, maintains dozens of companies across multiple industries, and would benefit from a virtual monopoly over Iran’s (vastly shrunken) economy when sanctions are reimposed. All of this is affecting Iran’s internal dynamics. Despite the spike in GDP growth that followed sanctions relief, the Iranian people saw few material benefits. Wages remained stagnant and unemployment and prices high. Those who engineered the deal, President Hassan Rouhani and Foreign Minister Javad Zarif, are increasingly unpopular — as is the IRGC, which is seen as diverting scarce capital from Iran’s economy to foreign adventurism. Thus even if the latter stands to profit financially from the reimposition of the sanctions regime, all parties could lose politically unless the economic picture improves. For that to happen, Iran will need foreign investment and viable export markets for its crude. If Tehran is looking to China for a lifeline, it’s likely to be disappointed. Bloomberg View