The White House believes that China’s actions are undermining strong pressure on Iran. In response, China’s Foreign Ministry Spokesperson Geng Shuang stated that China’s cooperation with Iran is legal and Beijing opposes any unilateral sanctions and extraterritorial jurisdiction over its enterprises.
In mid-2018, the United States unilaterally withdrew from the 2015 Iran nuclear deal and announced the restoration of all sanctions against the country. In particular, there was supposed to be a total ban imposed on the purchase of Iranian oil and the servicing of all oil transactions. According to the International Energy Agency, for Iran, with the third-largest oil reserves in the world, this is a serious blow. As has been estimated by World Bank experts, in 2018–2019, two-thirds of the total increase in Iran’s GDP was provided by the oil sector.
It is clear that under such conditions, Iran will do its best to find buyers for the country’s oil, as has already happened in previous years during US sanctions. After the re-imposition of sanctions the United States even began to threaten other countries with secondary sanctions if they continue to buy Iranian crude. A number of US allies have already stopped purchasing oil from Tehran. China, however, is apparently not going to give up Iranian oil.
According to the magazine Politico, in June, a tanker loaded with one million barrels of Iranian crude arrived at the port of Qingdao. Another supply – almost two million barrels – passed through the port of Tianjin. The hawks in the US National Security Council are now pushing the United States to impose secondary sanctions on Chinese importing enterprises since Washington believes that China’s actions undermine all American efforts to put maximum pressure on Iran.
If sanctions are imposed this will complicate the already difficult process of trade talks between the United States and China. In May, after 11 rounds, the negotiations ended in failure. Only after the meeting of the two heads of state in Osaka was it possible to reach an agreement on the need to resume negotiations.
Nevertheless, so far even the date for a new meeting between negotiators from both sides has not been determined. In such a situation, China should not pander to the whims and caprices of the United States. Whether it’s the Iranian issue or something else, negotiations are already complex and difficult, Li Weijian, a professor of West Asian and African Studies at the Shanghai Institute for International Studies said.
“I think that even without the oil issue, there are still a lot of unresolved problems in the trade talks between the PRC and the United States. But the US is unlikely to place much emphasis on the issue of China buying Iranian oil to put pressure on the PRC during trade negotiations. After all, if the negotiations fail, it will not be only a unilateral sanction against China. It is also important for the United States that the two countries sit down at the negotiating table, it is in their interests. A lot of American, domestic economic issues depend on it. So, the United States, of course, will take into account the situation with Iranian oil, but this will not be the decisive factor. US-China trade is a two-way road and it is also very important for the United States to negotiate. America has already tried to put pressure on China, intimidate us, in order to secure some sort of short-term victories. However, it turned out that China’s position is extremely clear: China is in a better position in all respects than the United States. So, of course, there will be some impact of the issue of purchasing Iranian oil but not at all significant. And if the US decides to impose any sanctions because of this, first of all, it would impact them as well”.
China is the largest market for Iranian oil. According to the information portal TankerTrackers, in April of this year, oil supplies from Iran to China reached a record 913,000 barrels per day. And in the first half of the year, China purchased 600,000 barrels of oil per day from Iran on average, which is more than 40% of the total oil supplied by Iran for export.
In the conditions of sanctions, Iran is trading oil at a discount. And for China, a stable and inexpensive supply of black gold to maintain its slowed economic growth is very important. One can therefore hardly expect that China will refuse the Iranian offer, Li Weijian said.
“I think that in the future it is imperative to continue purchasing Iranian oil. The unilateral US sanctions are internal American rules, and not necessarily the whole world should follow them. Both the IAEA and Iran have repeatedly recognised that Iran is fully implementing the agreement. The fact that China buys oil from Iran is a normal practice. Whereas it is not normal to just stop purchasing. Now many countries are trying to work out a solution on how to keep the Iranian deal, how to resist US sanctions. Europe and a number of other countries are thinking about this. But from Iran’s point of view, they are not doing enough. For Iran, it is important to ensure the uninterrupted shipment of oil for the normal functioning of the economy. And the humanitarian aid provided by some countries is all half measures. Therefore, Iran is now taking certain steps, and the point is not that the country wants to destroy the deal but to put pressure on other countries to help Iran resist the unjust US sanctions. The EU is now trying to help so that Iran does not recede from the previously reached agreements. Otherwise, the Iranian nuclear deal can be considered buried”.
Could it be that the US goal is not the Iranian nuclear programme, but the oil market? The International Energy Agency (IEA) predicts the overproduction of oil in the world next year. According to the IEA, in the first half of 2019, oil supply exceeded demand by 900,000 barrels per day. Next year, the effectiveness of the OPEC+ deal will become lower, since non-member countries, mainly the United States, will intensively increase production, the IEA study says.
In such a situation, it is important for the US to create a shortage of oil in the market in order to get into this niche with its products in time. According to Reuters, in the first quarter of 2019, Iran exported an average of 1.3 million barrels per day. If this volume leaves the world market overnight, there will be a shortage that can be filled by American shale oil.
Whether US sanctions will affect the world oil market is not yet completely clear. But they have already impacted the nuclear deal. Since 7 July, Iran has started increasing uranium enrichment to above the 3.67 percent set by the terms of the 2015 nuclear deal. According to Tehran, the Iranian decision to cut commitments is due to European countries, parties to the nuclear deal, not taking any measures to protect the Islamic Republic from US sanctions.
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