Following the steep decline of Iranian oil exports after the U.S. ended all waivers for Iran’s oil buyers, Iran is calling on China and other ‘friendly countries’, as it put it, to buy more crude oil from the Islamic Republic.
“Even though we are aware that friendly countries such as China are facing some restrictions, we expect them to be more active in buying Iranian oil,” Iranian Vice President Eshaq Jahangiri was quoted as saying by Iranian media. Jahangiri was meeting with Song Tao, Head of the International Liaison Department of the Communist Party of China, in Tehran this week.
China, the single largest buyer of Iranian crude oil before the U.S. sanctions hit the Islamic Republic’s oil exports, continues to import oil from Iran, despite the ‘zero exports’ maximum pressure campaign of the United States. China has said that it wouldn’t comply with the U.S. sanctions on Iranian exports. Yet, Chinese oil imports from Iran are much lower than they used to be just a few months ago.
According to Chinese customs data, cited by Reuters, Iran sent a bit over 208,000 bpd of crude to China, which was down from over 250,000 bpd in May.
Early this month, the U.S. threatened to hit China with sanctions over its continued imports of Iranian oil. Last week, U.S. Secretary of State Mike Pompeo said that the U.S. is imposing sanctions on Chinese entity Zhuhai Zhenrong and its CEO Youmin Lin because “they violated U.S. law by accepting crude oil.” Related: Did Trump’s ‘Plan B’ For Iran Just Fail?
“We’ve said all along that any sanction will indeed be enforced,” Secretary Pompeo said, adding “No entity should support the regime’s destabilizing conduct by providing it with money.”
“The US imagines that it can zero down our oil sales by exerting pressure on the countries which purchase Iran's oil to lead Iran's economy towards a collapse, but fortunately, the situation of Iran's economy enjoys an acceptable stability one year after the US oil sanctions,” Iran’s Fars news agency quoted Jahangiri as saying during the meeting with the top Chinese diplomat this week.
Despite Iran’s claims that its economy is resilient, the World Bank and the IMF expect the Iranian economy to plunge deeper into recession because of the U.S. sanctions that have cut a large portion of Iran’s main foreign income generator, oil.
By Tsvetana Paraskova for Oilprice.com
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Where does the author think these exports went? More than 86% of these exports went to China, India, Turkey and Russia (oil-for-goods). The remaining 14% were sold in spot markets or went to countries which didn’t want to declare themselves for fear of US reprisals.
China never stopped for one minute buying Iranian crude in increasing volumes both for its refineries and also for its Strategic Petroleum Reserve. It has been accounting for more than 31% of all Iranian exports or 659,000 barrels a day (b/d).
India made it clear that it doesn’t recognize US sanctions against Iran and Venezuela. It only recognizes UN sanctions.
Moreover, India has to look after its own interests particularly when having to pay a hefty bill for importing 4.54 million barrels a day (mbd) in 2018 projected to rise to 4.8 mbd this year. That is why it is continuing to buy large volumes of oil from both Venezuela and Iran.
If Iran is calling on China and other friendly countries to buy more Iranian crude oil, it is to blunt US sanctions further and also to mislead the United States about the resilience of the Iranian economy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London