Not Waiting on Biden: China breaks US Iran Blockade, moves to import nearly
1 mn b/d of Ayatolllah's Oil
JUAN COLE
03/15/2021
Ann Arbor (Informed Comment) - China is dramatically ramping up its imports
of petroleum from Iran this spring, going from a daily average of 300,000
barrels per day during the past year to 856,000 bpd. So reports Felicity
Bradstock of Oilprice.com.
The Biden administration has dragged its feet on negotiating a return to the
2015 nuclear deal or Joint Comprehensive Plan of Action (JCPOA). Biden and
his secretary of state, Antony Blinken, are insisting that Iran must take
steps to come back into compliance with the JCPOA before Washington will
offer Iran any sanctions relief.
Iran has refused, feeling that it only signed the JCPOA because Tehran was
promised an end to sanctions. Instead, Iran gave up 80% of its civilian
nuclear enrichment program in return for less than nothing. So the
ayatollahs feel they are the aggrieved party here, and the US should drop at
least some of the Trump-era sanctions to start the ball rolling.
Some of the basis for Iran's confident defiance of Biden may lie in the
prospect of ramping up its sales to China extensively. Beijing is apparently
calculating that Biden's Treasury Department is unlikely to initiate big
fines on China for dealing with Iran at a time when the US itself is hoping
to deal with Iran.
The Trump administration had breached the JCPOA in May, 2018, and then
placed US Treasury Department sanctions on virtually all Iranian trade,
including ordinary petroleum sales, by sanctioning Iran's Bank Markazi or
central bank. The US threatens third parties with sanctions, so if a French
firm traded with Iran through its central bank (and how else would you do
it?), it could be fined billions by the U.S.
China was never very afraid of the Trump sanctions, since the US runs a more
than $300 billion trade deficit annually with China and so the two countries
are joined at the hip. (No, Trump, despite his lies and bluster, did not
reduce that trade deficit from what it was under Obama before the pandemic
hit). But Beijing did reduce its reliance on Iranian petroleum and avoided
doing any dollar trade with Iran for its oil. Iran seems to have more or
less smuggled oil to China on third party tankers, dealing with independent
Chinese concerns rather than with Sinopec or one of the other state-owned
majors. Iran may also have secretly shipped oil to China through the United
Arab Emirates, Oman and Malaysia. In fact Postmedia/ Financial Tribune
estimates that 75% of Iran petroleum imports into China came via these third
countries, mainly to independent refiners in Shandong province.
Avoiding the dollar trade, accepting soft currency payments, and smuggling
under the US radar causes Iran to take a big cut in revenue, perhaps as much
as a third of its typical profits before the Trump maximum pressure
campaign. On the other hand, two-thirds of something is better than nothing.
Now, China appears to be throwing caution to the wind.
Postmedia reports that Iranian petroleum officials are also reaching out to
India and other Asian customers, seeking to renew the oil trade in a few
months.
This approach suggests that Iranian officials are confident of being able to
reach an accommodation with Biden and that the days of the maximum pressure
campaign are limited.
That is, although Iran may benefit in the short term from a lessening of US
economic pressure via its sales to China, officials in Tehran still have
their eye on the big prize, which would be an economic normalization and the
end of US sanctions. That is a pretty hopeful signal, more hopeful than I
had expected to discover when I took up this essay today.
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