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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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U.S. Threatens China With Sanctions On Iranian Oil Imports

The U.S. State Department has threatened China with sanctions because of its continued imports of Iranian oil—a move that was only to be expected but hardly the wisest one amid still high trade tensions between the two countries.

"We're going to zero [exports of Iranian crude] and ... countries that don't abide by US sanctions will face repercussions for not abiding by US sanctions," S&P Global Platts quoted a State Department spokeswoman as saying. "That goes for China or any other country in the world. We expect all countries to abide by US sanctions."

China is importing Iranian crude at a rate of 150,000 to 220,000 bpd despite the end of sanction waivers the U.S. had initially granted to Iran’s eight largest oil clients. China has from the beginning said it would not comply with U.S. sanctions on Iran and would continue importing Iranian crude, unlike India, which initially said it would only respect UN sanctions but later stopped buying Iranian oil to avoid angering Washington.

U.S.-Chinese relations are different, however. After the latest flare-up in trade, after President Trump threatened more tariffs on Chinese goods, the tension gradually diffused to the point where the two have returned to the negotiating table. Yet China has made clear it is not in the mood for major concessions, so the outlook for the negotiations remains unclear. A threat with sanctions will hardly change that mood.

That China continued importing Iranian oil after the sanction waiver ended is no news. What was news earlier this month was a report by Politico citing Washington officials as saying the administration was considering granting a special waiver to China. This report, followed by the State Department spokeswoman’s statement, is a classic case of mixed signals, typical of a situation this complex. However it plays out, chances are China will continue buying Iranian oil.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on July 12 2019 said:
    China will ignore any threats of sanctions from the United States over its imports of Iranian crude oil. China is not only a superpower in its own right but it is capable of nullifying the entire US sanction regime against Iran by buying the entire Iranian oil exports estimated at 2.125 million barrels a day (mbd) and paying for them in petro-yuan thus further undermining the petrodollar and by extension the US financial system.

    China hasn’t stopped buying Iranian crude oil even for one minute accounting for 31% or 659,000 barrels a day (b/d) and it has no intention of stopping now or in the future. Moreover, China made it clear from the start that it doesn’t recognize US sanctions and it therefore has no intension of complying with them. The same logic applies to India and Turkey the two other big buyers of Iranian crude.

    The US State Department is deluding itself by saying that it is still pursuing a zero exports option with Iran knowing full well that it is a lost cause. Moreover, US sanctions against Iran have failed so far miserably to adversely affect Iranian oil exports.

    While the US State Department can get away with such threats against lesser countries, China is not one of them. It could retaliate decisively against any US sanctions against it.

    China has shown its mettle during the trade war with the United States when President Trump blinked first by easing restrictions on Huawei, the Chinese tech giant, in a bid to get trade talks moving again.

    Washington had earlier announced a ban that restrict Huawei’s ability to do business with US firms due to national security concerns.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Bill Simpson on July 12 2019 said:
    Watch what happens to the stock market if they make the mistake of sanctioning China.
  • Hugh Williams on July 13 2019 said:
    The US is acting like the Uk did when they ruled the world and invaded China to force them to import opium from India. The Chinese remember being treated like animals and will work very hard to teach the US a lesson. This lesson could take years, but the Chinese are long term players.

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