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In order to keep Iranian oil flowing to China, Chinese refiners and oil traders have started to switch to using Iran-owned tankers for almost all their crude oil imports from Tehran, Reuters reported on Monday, citing four sources with direct knowledge of the issue.
Sinopec, the largest refiner in Asia, as well as Chinese state-run oil trader Zhuhai Zhenrong Corp, have activated the clauses in their long-term supply deals with Iran to use tankers owned by the National Iranian Tanker Company (NITC), according to Reuters’ sources. Iran is also now covering the costs and risks of shipping the oil to China and is taking care of the insurance, the sources said.
According to Thomson Reuters Eikon shipping data, all 17 crude oil tankers from Iran to China in July were operated by the Iranian tanker company. To compare, the previous month, Chinese companies operated 8 out of 19 tankers that shipped oil from Iran to China.
China has said that it would not stop buying Iranian oil despite U.S. efforts to have the Iranian exports down to ‘zero.’ But Beijing is also said to have agreed not to increase its oil purchases from Iran.
Iran, for its part, is keen to keep its single biggest oil customer—China—when U.S. sanctions on Iranian oil exports kick in later this year.
While Western shipowners and insurers are backing out of deals with Iran for fear of running afoul with the U.S. Administration and risking secondary U.S. sanctions, Iran is looking to maintain its customers in Asia by offering Iran-owned tankers and providing cargo insurance.
Tehran is said to have started to offer India cargo insurance and tankers operated by Iranian companies as some Indian insurers have backed out of covering oil cargoes. Tehran is also cutting the prices of its oil for Asian customers.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.