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China has reassured Tehran that it will continue to import its crude, despite the United States’ withdrawal from the nuclear deal that will now be followed by sanctions targeting the Iranian oil industry among others.
A spokesman for the Foreign Ministry in Beijing, Geng Shuang, said, as quoted by Radio Free Europe, that China will "carry on the normal and transparent pragmatic cooperation with Iran on the basis of not violating our international obligation."
This makes China the latest to signal that it has no intention of stopping the flow of Iranian oil to its storage tanks and refineries. While this move, however, was to be expected since China is not dependent on the United States for its national security or economic growth, Japan and South Korea have also indicated they are already looking for ways to keep importing Iranian crude.
China is the biggest single buyer of Iranian crude, so its commitment to continued imports will likely curb the negative effect from any future U.S. sanctions on the Iranian oil industry and economy. This would undermine the effect of the sanctions on oil prices, which most analysts expect will become most markedly felt several months after the introduction of the sanctions.
Related: Oil Markets Tremble On Iran, Israel Flare-Up
Currently, analysts believe that the sanctions could take between 200,000 and up to a million bpd of Iranian crude off global markets, but it seems that every major importer of Iranian crude is planning to request a sanction waiver. This includes all of the U.S.’ top trading partners, including the European Union. If waivers are granted to all, the effect of the sanctions on oil will be negligible, and the need for Saudi Arabia to step in and raise its production may never arise.
However, if the United States refuses to grant waivers to its partners, things could go either way. According to some, such as the Daily Telegraph’s Ambrose Evans-Pritchard, everyone will fall in line behind the United States to avoid losing their access to American capital markets, despite talk about trying to enact a blocking regulation from 1996. If Iran’s clients decide to fight for their right to Iranian crude, international politics could become very messy.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.