China has dramatically increased its oil imports from Iran and Venezuela, putting at risk two of the Biden administration’s foreign policy priorities, US officials say, undermining the key diplomatic levers Washington needs to get long-stalled negotiations back on track.
China is expected to import 918,000 barrels a day from Iran in March, the highest volume since the US imposed a full oil embargo on Tehran two years ago, according to commodities data agency Kpler.
This trend is confirmed by other ship chasers, some of whom sell up to 1 million barrels per day.
If it sells a million barrels a day at current prices, Iran has no reason to negotiate, said Sarah Vakhshouri, president of Washington-based SVB Energy International and an expert on Iran’s oil industry.
President Biden’s administration has sought dialogue with Iran to return to the 2015 nuclear deal, which was brokered by his predecessor, the former president.
But Tehran has so far refused any rapprochement.
Abadan oil refinery in southwestern Iran in 2019. Iran has helped Venezuela supply petroleum products, sell diesel and other essential energy sources in exchange for Venezuelan oil and gold.
China’s oil purchases in Venezuela, where the US is trying to use sanctions to put pressure on the Maduro regime to hold credible democratic elections, are also on the rise, according to London-based financial data provider Refinitiv.
Iranian and Venezuelan officials said the increase in oil shipments to China followed an offer by Biden to help Iran in exchange for compliance with an international nuclear deal and Venezuela if it holds free elections. Sir, I want to thank you for your support. Trump has pursued a policy of escalating sanctions pressure on both countries.
China is also increasingly flouting international sanctions against North Korea and no longer trying to hide some of its smuggling activities to help Pyongyang, US officials said recently.
These people say these developments, combined with rising oil prices, have reduced pressure on Tehran and Caracas to negotiate with Washington.
China’s unofficial purchases have reduced the need for Tehran to negotiate oil sanctions, said a U.S. official with interests in Iran.
While Iran insists it is not trying to build a nuclear weapon, an inspection of its key facilities suggests it may be developing the technology to do so. VDB dissects Tehran’s capabilities as it approaches new stages of uranium enrichment and limits access for inspectors. Illustration photo: George Downs.
A State Department spokesman rejected the idea that the Biden administration would ease sanctions without Tehran doing anything to implement the nuclear deal, known as the Joint Comprehensive Plan of Action, or JCPOA.
We are ready to resume constructive diplomacy to achieve a mutual return to compliance with JCPOA obligations, which would of course include the lifting of sanctions on Iranian oil exports, she said. But our current sanctions against Iran will remain in place until they are lifted through a diplomatic process, and we will, of course, study any attempt to circumvent them.
Since November, Iranian oil traders say they have been approached by Asian buyers looking to take advantage of lower prices because these buyers believe the pressure of sanctions under the Biden administration will ease.
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Iranian officials and traders are increasingly circumventing sanctions, making clandestine remittances in the Persian Gulf and South Asia to disguise the origin of their cargo, and finding new ways to access money through non-banking platforms such as cryptocurrencies.
On Monday, the first vice president of Iran
said Iran’s oil exports have increased in recent months, but gave no details.
There have been some problems with the money transfers. So we had to develop some plans and methods to generate revenue from oil exports and we have made a breakthrough recently, the state news agency IRNA quoted Jahangiri as saying.
Homayoun Falakshahi, an analyst at Kpler, said tracking of the ship showed that the fastest growing buyer was the government.
China Petroleum & Chemical Corp.
or Sinopec, the largest oil refinery in the country. After cutting staff and costs over the past two years, Sinopec is posting new job openings online and negotiating with the government to double production in the country, according to former Iranian oil officials and a consultant to the company.
Officials from Sinopec and the Chinese Embassy in Washington did not respond to requests for comment. Chinese officials have long criticized U.S. policy toward Iran and Venezuela, as well as U.S. financial diplomacy, as unilateral and coercive.
Sinopec gas stations in Shanghai in January.
Cilai Shen/Bloomberg News
Washington still hopes to lure the Islamic Republic with more substantial aid that would include the release of billions of dollars in frozen oil funds and a resumption of official crude sales. In return, the United States wants Iran to abide by the nuclear deal, despite repeated violations, and wants tighter controls on Tehran’s ballistics program and other efforts not covered by the original nuclear deal.
Meanwhile, Iran is helping Venezuela by supplying oil products and selling diesel and other essential energy products in exchange for Venezuelan oil and gold. This oil is then sold on world markets, providing revenue for Iran and strengthening Mr Maduro politically.
For U.S.-China relations, already strained by a series of security and economic disputes, Beijing’s brazen trade with Washington’s two main enemies is another major source of irritation.
This is a complex relationship, probably the most sustainable for our two countries, with conflicting, competing and cooperative aspects, the Secretary said.
said earlier this week.
US officials have reminded China that companies that help import oil from Iran face sanctions and said Beijing could be punished for its trade with Venezuela. The State Department declined to comment on its communications with China.
Maduro’s regime has been adapting to oil sanctions by finding a way to circumvent them and transport oil to China and Russia, and Iran is helping it do so, a senior government official said. So we will use our sanctions tools to make sure we eliminate those options for the Maduro government, the official said.
Others, however, say the administration will also ensure that such a policy is consistent with U.S. economic interests. In some cases we [China] have not imposed sanctions because of the impact on our economy. If we strike hard, they might strike back, another U.S. official said.
This week, officials from the Biden administration are meeting with their Chinese counterparts for the first time in Alaska.
Email Benoit Faucon at [email protected] and Ian Talley at [email protected]
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