The US will penalize any country that violates its sanctions, albeit it will not go after China because it is fearful of what an escalation would look like. Knowing this full well China is buying 700K barrels of Iranian oil every single day, as they violate US sanctions.
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Iran has been condemned to crushing oil-export restrictions for numerous years, but this has not deterred China, whose importation of Iranian oil has climbed month after month, according to traders and ship-tracking agencies who told Reuters.
Chinese purchasers are increasing their crude imports at cheap costs as the international crude benchmark Brent climbs, outweighing any dangers posed by US penalties.
Furthermore, as Reuters reports, Chinese imports of Iranian crude have continued to climb this year, amid sanctions that, if imposed, would enable Washington to cut anyone who breach them off from the US economy.
However, with the US president unlikely to start waking up from his nap or refuse to be disturbed while consuming ice cream and do anything to penalize China for breaking the terms of the embargo, Chinese importers surpassed 700,000 bpd in January, as per three tanker trackers, exceeding the 623,000 bpd apex documented by Chinese customs in 2017 before former President Trump reinstituted sanctions on Iranian oil exports in 2018.
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According to one tanker tracker, imports averaged 780,000 bpd from November to December.
Most of the purchasing originates from independent Chinese refiners (also known as “teapots”), who welcomed Iran’s cheaper oil as Brent costs climbed from $77 to $91 last month, according to traders. Teapots paid a market discount, dealing at a $5 per barrel discount over Brent.
According to the consultancy company Petro-Logistics, which measures oil movements, Iran’s total crude exports increased to more than 1 million bpd in December, the highest level in three years.
“Iran’s oil exports are mostly going to China, often through convoluted routes and transshipments, with small volumes going to Syria each month,” said CEO Daniel Gerber.
Total Iranian oil shipments are expected to be 800,000 bpd in January and 700,000 bpd in February, according to Petro-Logistics. Another tracking business, OilX, predicted 1 million bpd for both January and February.
Iranian imports are expanding as officials from Iran and the United States seek to negotiate a resumption of the 2015 nuclear accord. If such an agreement is reached in Vienna, the relaxation of most international sanctions against Tehran would result in a torrent of Iranian oil exports across the world, diverting sales away from Chinese teapots.
The Ukrainian situation has certainly given Iran a stronger negotiating position, as Brent has risen beyond $100 per barrel due to geopolitical concerns. Increasing political pressure on President Biden to control rising inflation, and, more crucially, high gas costs before of the midterm elections, may make western politicians more open to an agreement to lower oil prices.
On Friday, a senior US State Department official told the WSJ that there were only a few days left to bridge the remaining gap between Iran and the US in order to reach an agreement.
“Final decisions have to be taken this week—either we have a deal or we do not,” an official from one of the European countries at the talks said Monday. “The context of the current international crisis means the window of opportunity is closing.”
Meanwhile, it seems like the US would penalize countries that violate its sanctions, albeit it will not go after China because it is fearful of what an escalation would look like.