Daily Management Review

China keeps importing Iranian oil in spite of US sanctions


Tankers related to the Chinese state-owned company China National Petroleum Corporation (CNPC) continue to supply Iranian oil to China despite sanctions against Iran, the United States discovered. This was reported by the Financial Times with reference to a person familiar with the situation and data from TankerTrackers. If the US decides to take tough measures, this could further worsen relations between Washington and Beijing.

Alf van Beem
Alf van Beem
Administration of US President Donald Trump, after withdrawing from the international agreement on Iran’s nuclear program in May 2018, seeks to exert "maximum pressure" on Tehran. In November, Washington imposed sanctions, including prohibiting import of oil from Iran, although it made an exception for China and several other states, allowing them to continue purchases until May 2019. But Beijing continued to buy oil from Iran after that. According to the Chinese government, in May it imported 7.9 million barrels of Iranian oil, and 6.3 million - in June. For comparison: in the first four months of 2019, imports averaged 16.7 million barrels.

At least three Bank of Kunlun tankers (owned by CNPC) have repeatedly interacted with Iranian ships since May, writes FT. The tankers turned off their transponders for several days, but they still managed to track their movements thanks to satellite images taken by Planet Labs and transmitted to TankerTrackers, and estimate how much cargo the tankers took. “Satellite data and images definitely suggest that tankers associated with Bank of Kunlun are transporting Iranian oil,” says Samir Madani of TankerTrackers. “These tankers serve as a bridge between Iran and China.”

At the same time, at the end of last year, The Wall Street Journal, citing its sources, wrote that CNPC decided to abandon oil supplies from Iran. The Bank of Kunlun was supposed to stop operations with Iranian counterparties on November 4, the day when sanctions were resumed. The bank denies that it is currently involved in oil imports.

At the end of July, the United States already imposed sanctions against Chinese oil trader Zhuhai Zhenrong, accusing him of buying Iranian oil. The company will not be able to make transactions in the United States with its assets and property, as well as foreign exchange and banking transactions.

If Washington imposes sanctions against the CNPC, this will mean a significant escalation of its conflict with Beijing, FT writes. The company is China's largest oil producer, and its public division, PetroChina, operates in the United States and works with international energy companies. PetroChina shares are traded in New York. But Bank of Kunlun was always ready to donate, a former senior US intelligence official told FT. In 2012, the United States cut Bank of Kunlun off of its financial system for violating previous sanctions against Iran, and it still does not have access to it. In recent years, the bank has served Beijing as an official channel for purchasing oil from Iran.

Iranian oil supplies are still going on in the face of difficult relations between the United States and China. The countries have been conducting trade negotiations for more than a year but still haven’t reached any agreement. The other day, Trump announced introduction of 10% duties on imports of Chinese goods worth $ 300 billion from September. Thus, almost all imports from China will fall under US duties. On Monday, August 5, the Chinese currency fell below the mark of 7 yuan per dollar for the first time in 2008. According to some economists, this may be Beijing’s response to a trade war with the United States, although the People’s Bank of China denies this. 

In addition, Washington keeps putting pressure on Huawei. Therefore, some experts doubt that China will stop buying oil from Iran. 

source: ft.com