This isn't a bad take and it illustrates a Western weakness. Since the Iran protests gathered such media attention, and Israel is such a critical partner, the West is finding it very difficult to engage with the Iranians in the obvious counter move, which would be to normalize relations with Iran and to build it up as opposition to the China-Saudi partnership. Reasonable geopolitics are, therefore, being compromised by the need to service liberal values. By contrast, China is free to pivot to either side as interests demand.
As for China's strategy, I think getting Saudi Arabia and Iran to play nice with each other is impossible, so China-Iran relations will take a hit from Xi's move to court the Kingdom. Nonetheless, Iran doesn't have many choices - its main patron, Russia, is too busy with the War in Ukraine to help much in a conflict. That leaves it vulnerable and provides an opening for a third party to step in. India would be the obvious candidate - if Modi was smart, he'd be courting Iran just about now. But assuming India doesn't step in, Iran's isolation will be profound and this will have consequences for the balance of power in the Middle East.
I still think China has a role to play in Iran and that Xi should be careful about getting too close to Saudi Arabia. The Arab world is more important than Iran, to be sure, but Saudi Arabia does still have relations with the US and will surely look to play the US against China, since the crown prince appears quite intelligent and understands his country's importance in the great game that is developing. Consequently, China should continue to try and keep Iran in its own court and away from the US and EU. The question is what China would be able to offer without compromising its over all strategy of engagement with the Arab world. Maybe civilian technology?
