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A senior Iranian oil official asked Chinese state oil buyers this week to continue their oil import levels of Iran’s crude after the U.S. sanctions on Tehran return later this year, Reuters reported on Wednesday, quoting three people familiar with the meetings.
Saeid Khoshrou, director of international affairs at the National Iranian Oil Company (NIOC), met with Chinese oil giant Sinopec and with state-run oil trader Zhuhai Zhenrong on Monday, seeking assurance from the Chinese customers that they would continue buying Iranian oil. Khoshrou had accompanied Iran’s Foreign Minister Javad Zarif on the China trip, before the minister headed to Europe to discuss the Iran nuclear deal and the consequences of the U.S. withdrawal with European Union leaders.
According to Reuters’ sources, the Iranian oil official failed to get a firm commitment from the Chinese buyers. They are still reviewing the possible implications of the sanctions, but they also expressed hope that they would keep Iranian oil import levels. The Chinese buyers will conform to China’s official policy on the matter, a source briefed on the meetings told Reuters.
China imported around 655,000 bpd of Iranian oil on average in the first quarter this year—a volume equal to more than a quarter of Iran’s total crude oil exports.
Combined, the biggest refiner in Asia—Sinopec—and oil trader Zhuhai Zhenrong account for nearly 90 percent of China’s crude oil imports from Iran, while state oil firm CNPC purchases the rest, according to Reuters data.
Related: OPEC: The Oil Glut Is Gone
Last week, a spokesman for the Foreign Ministry in Beijing reassured Tehran that China would continue to import its crude, despite the U.S. withdrawal from the nuclear deal.
During the previous sanctions period, China had less banking issues in trading with Iran than Europe, for example, because Beijing used a local bank to settle the payments, mostly in euros and in Chinese yuan. This time around, China could push for more yuan-settled transactions to advance its petroyuan.
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.
China will not only continue to buy Iranian oil but will also increase its oil imports from Iran to replace the reduction of their Saudi oil imports after the Saudis raised the price for their Arab light they have been selling to China and also to preempt Japan and South Korea complying with US sanctions and shunning Iranian oil.
China has a vested interest in having Iranian oil imports priced and paid for in petro-yuan. Iran has already indicated that it will be using the petro-yuan for payment for its oil exports to China, the euro for its exports to the EU and barter trade with Russia, India and many other countries around the world thus bypassing the petrodollar altogether and nullifying the impact of the sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London