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The U.S. Might Sanction China’s Largest Oil Company

The Trump Administration's decision to reimpose sanctions on the Iranian oil trade has dramatically reduced Iranian crude exports - but it hasn't stopped some of the U.S.'s largest economic rivals from accepting shipments of Iranian crude, according to several media investigations. Not only has China continued to import Iranian crude, so have several other Asian and Mediterranean countries, according to data from several tanker tracking services studied by the New York Times and other media organizations.

Per the NYT, in April 2018, before Trump withdrew from the nuclear deal, Iran exported 2.5 million barrels of oil per day. One year later, that figure was at one million. And in June, after the end of the exceptions or waivers, ships in Iranian ports loaded about 500,000 barrels per day, according to Reid I'Anson, an energy economist at Kpler, a company tracking seaborne commodities.

Of course, this fact isn't lost on the Trump Administration, which, according to the FThas been tracking the movements of tankers linked to China's biggest state-run oil company amid signs that the ships are helping to bring in Iranian crude.

China National Petroleum Corp, via its subsidiary, the Bank of Kunlun, has, in recent months, employed a fleet of tankers to move oil from Iran to China.

And an NYT visualization of tanker traffic shows the route some of these tankers take while moving oil from Iran to China and elsewhere in the region.

Below are satellite images of some of these tankers docking at Chinese ports.

Last week, the Treasury Department sanctioned Chinese oil trader Zhuhai Zhenrong for buying oil from Iran. The decision was intended to send a message to other Chinese firms, and anyone else buying Iranian oil who also hoped to do business with the U.S. Related: China Unlikely To Slap Retaliatory Tariff On U.S. Crude Oil

"Any entity considering evading our restrictions, particularly related to Iranian petrochemicals, should take this message seriously," said one official. "We recently sanctioned Zhuhai Zhenrong...for knowingly engaging in a significant transaction for the purchase or acquisition of crude oil from Iran. This action underscores our commitment to enforcement."

But targeting CNPC would be an especially serious escalation at a time when tensions between the U.S. and China are nearing a breaking point. Even as satellite data and imagery suggest that the tankers linked to Bank of Kunlun are employing tactics including turning off tracking devices and changing their names.

Any U.S. decision to target CNPC would mark a significant escalation given the company’s status as China’s largest oil producer. Its publicly listed arm, PetroChina, has operations in the U.S. and secondary shares listed in New York, in addition to partnerships with international energy companies such as Ineos.

Bank of Kunlun said it was "not involved in the crude oil import business" and denied having "violated any laws or regulations." But people in Washington familiar with the activities of the bank said it was viewed by the U.S. as a "bad actor." "Bank of Kunlun has always been the sacrificial lamb for CNPC and, more broadly, for the Chinese government," said one former senior U.S. intelligence official. “It is a bank that the Chinese government recognises as expendable in some sense.”

And cracking down on the Bank of Kunlun would come with certain risks that might impede the U.S.'s agenda, particularly when it comes to North Korea.

"China is not going to do the U.S. any favours," said Dennis Wilder, a former top CIA and White House official. "This is the price you pay strategically. You cannot tell China on the one hand to be aligned with you on Iran and North Korea and at the same time decide you’re going to retard or destroy some of their corporations."

Still, after labeling China a currency manipulator last night, it appears Washington has decided on a hardline approach. Will sanctions on CNPC and the rest of the Chinese energy industry be next?

After all, Beijing has made clear that it has no problem being Iran's most important lifeline during an extremely difficult time.

By Zerohedge.com

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  • Mamdouh Salameh on August 07 2019 said:
    For a country which has virtually lost the trade war with China, Washington’s mulling over sanctioning China’s largest oil company for importing Iranian crude oil is like an insect bite.

    President Trump and his administration and authors who publish such empty threats should understand the following facts.

    The first is that China doesn’t recognize US sanctions on Iran and therefore it will never comply with them and will continue to buy Iranian crude in increasing volumes come rain or shine.

    The second fact is that China is not Djibouti and therefore it doesn’t need Washington’s permission to buy Iranian crude.

    The third fact is that China is Iran's largest importer of Iranian crude accounting for 31% of all Iranian oil exports or 574,000 barrels a day (b/d) and has never stopped even for one minute buying Iranian crude.

    The fourth fact is that China has the ability to nullify the US sanctions regime against Iran altogether at will but hasn’t so far done so because it didn’t wish to escalate the trade war with the US further. However, if Washington decided to impose sanctions on China’s oil giant, CNPC, China wouldn’t hesitate for a minute to start buying the entire Iranian crude oil exports and paying for them in petro-yuan.

    The fifth fact is that US sanctions against Iran have so far failed miserably to adversely impact Iranian oil exports. The same buyers who have been buying Iranian crude before the sanctions are still buying doing so after the sanctions. Prominent among them are China, India, Turkey and many countries around the world including Russia (on oil-for-goods-basis). Despite the sanctions, Iran’s crude oil exports in 2018 averaged 1.85 million barrels a day (mbd) according to the authoritative 2019 OPEC Annual Statistical Bulletin and are projected to amount to slightly less allowing for the slowdown in global oil demand as a result of the trade war.

    The sixth fact is that contrary to claims made in this article, Iran’s oil exports never ever reached 2.5 mbd. They were 1.11 mbd in 2014, 1.08 mbd in 2015, 1.92 mbd in 2016, 2.13 mbd in 2017 and 1.85 mbd in 2018 according to OPEC Annual Statistical Bulletin.

    With the trade war escalating rapidly, the hawks in Washington might see their chance to convince President Trump to abrogate the time-honoured agreement the Nixon administration reached with China on the status of Taiwan. Were he to be foolhardy to take such action, he would have crossed a red line after which anything could happen between China and the US.

    One can already suspect the United States’ involvement in the political turmoil which has been taking place in Hong Kong for the last nine weeks. I wouldn’t be surprised if a pro-independence campaign starts in Taiwan soon with US instigation and blessing.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Mehrdad Nematollahi on August 14 2019 said:
    Great comment from Mamdouh !

    President Trump should change his policy against Iran.

    His new policy should be aligned with Europeans and British governments.

    That is all ,I can say from Inside Iran.

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