China is buying Iranian oil in defiance of US sanctions and providing what Tehran hopes will be a financial lifeline for the country’s buckling economy.
Although Beijing customs data show crude purchases from Iran are down month-on-month, China is still importing Tehran’s oil despite US measures designed to cut exports to “zero”.
Last week the Chinese received their first delivery of an Iranian oil cargo since the Trump administration in May scrapped exemptions on Iranian sanctions.
TankerTrackers, which monitors flows of oil through satellite signals and imagery, said the tanker Salina — a Suezmax vessel capable of carrying around 1m barrels — had docked in Jianzhou Bay, near Qingdao, on June 20, unloading its cargo over the following two days.
Oil sales are a crucial part of Iran’s efforts to resist the “maximum pressure” campaign of financial sanctions launched by the US after it pulled out of a landmark nuclear deal last year. This week, Washington imposed a new round of sanctions on the Islamic republic and Ayatollah Ali Khamenei, its supreme leader.
“The latest turn of the sanctions screw will keep tensions simmering,” said Stephen Brennock at London-based broker PVM.
The deliveries of Iranian oil to China come as Beijing wrestles with Washington over trade, with the world’s two largest economies fighting over tariffs, access to each other’s markets and the role of the US in extending sanction threats to countries that deal with its enemies. The US has also sanctioned oil exports from Venezuela, which China has provided with billions of dollars in oil-backed loans.
Tehran has threatened to breach uranium stock limits agreed in the nuclear accord unless it receives compensatory economic benefits from the remaining deal signatories — China, Russia and European powers.
Beijing’s position has been closely watched because of its status as a big buyer of Iranian oil. It is also important because European efforts to do business with Iran have been hobbled by companies’ reluctance to risk retribution from the US.
Iran’s crude and oil condensate exports, which peaked at 2.8m barrels a day in April 2018, fell to around 1m b/d between November last year and April 2019 even though big buyers of Iranian crude — such as China and India — were given sanctions exemptions.
After the removal of these waivers, energy consultancy FGE expects this figure to drop below 500,000 b/d this month. China would account for about 200,000 b/d, it estimates.