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Washington – After the United States issued an oil embargo on Iran, Chinese companies have continued to trade with Iran, regardless of sanctions. Experts studying China-Iran relations said that China’s approach is not only due to economic considerations but also has strategic interests.

The most critical link in China-Iran relations is Beijing’s oil imports. Before the United States sanctioned Iran, China imported nearly 30 million tons annually, accounting for more than half of Iran ’s total crude oil exports.

Iran Oil

The United States announced its withdrawal from the Iranian nuclear agreement in May 2018 and extended sanctions to a total ban on Iranian oil purchases in May this year. Almost all countries have complied with the ban, but China and Syria are still the destinations for Iran ’s small amounts of crude oil.

Sanctions expert Elizabeth Rosenberg, a think tank’s new US Security Center, told  that China hopes to show that it can support its allies and ensure that China’s energy supply is secure.

“China is a big energy consumer and must seek multiple sources of energy supply to meet its huge market demand,” Rosenberg said.

After the United States announced the sanction order, China has repeatedly criticized the United States for unilateral sanctions against Iran, expressing opposition to Washington’s “long arm” jurisdiction and even saying that it will continue to trade with Iran.

 

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Bloomberg reported in September that China purchased oil from Iran at a “very low discount”; since the beginning of this year, China imported more than 12 million tons of crude oil from Iran, most of which have been delivered to Chinese refineries and the rest are stored at Iranian oil companies Located in a warehouse in China.

Robin Mills, chief executive of Dubai consulting firm Qamar Energy, believes that buying Iranian oil is a weight China can use in trade negotiations with the United States.

In the context of the intensified US-China trade war, China announced in August this year the first new 5% tariff on US crude oil, effective September 1.

Mills also pointed out that this also concerns how much China can challenge the United States. He said: “In the final analysis, this is not only about Iran, but also the ability of the United States to impose high-pressure diplomacy on China through sanctions. These sanctions may apply to China’s core interests such as Xinjiang and Taiwan in the future.”

However, as the United States increases pressure on Iran, China is also trying to avoid publicly mentioning these imports. China’s state-owned energy company Zhuhai Zhenrong, which is mainly responsible for importing Iranian oil, and six other Chinese entities, including companies such as COSCO Shipping, Zhonghe Petroleum and Kunlun Shipping, were sanctioned by the United States in July and September for violating the ban on Iran.

In 2012, China chose Kunlun Bank, a subsidiary of PetroChina, as the main bank to process payments between China and Iran to protect other Chinese banks from USD sanctions. But under the latest U.S. sanctions, the bank can only handle humanitarian material transactions, which means Iran cannot repatriate its income to its home country.

But China seems to avoid paying cash for imported oil, instead seeing it as Iran’s return to China’s investment in Iran’s energy industry. Earlier, Chinese state-owned enterprises Sinopec Group and China National Petroleum Corporation invested billions of dollars in Iran to develop oil fields, produce oil and ship it directly to China.

 

 

Katherine Bauer, a former Iranian policy adviser to the U.S. Treasury, said that whether this approach falls within the scope of U.S. sanctions is still in a gray area because it is a barter phenomenon and there is no Buy and trade among them.

At the same time, the Chinese shipping company also concealed the movement of Iranian oil by shutting down ship transponders and changing ship names.

Rosenberg said it was difficult to evade U.S. sanctions. “Only relatively small Chinese energy companies can continue to operate under sanctions. These companies can seek to stay away from U.S. jurisdictions, including U.S. currency, citizens, banks, companies, Technology or equipment. ”

 

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