The biggest state-controlled refiners in China are considering whether to buy Iranian crude after the U.S. on Friday issued a one-month waiver allowing imports of Iran-origin crude, sources with knowledge of the situation told Bloomberg on Monday.
China has been the biggest and nearly the only buyer of Iranian crude in recent years amid the U.S. sanctions on Iran’s exports, but all these sanctioned barrels were flowing on dark fleets to the independent Chinese refiners. These crude processors, commonly referred to as teapots, don’t care about any sanctions—their primary consideration in choosing supply is the price. The sanctioned Iranian barrels have been sold at much lower prices compared to international benchmarks, due to the illegal activity surrounding shipments and trade.
Chinese state oil refiners, however, have been staying away for years from Iran’s crude, to avoid running afoul of the U.S. sanctions.
But now, the sanctions on imports of Iranian crude loaded on vessels as of March 20 are lifted until April 19, as per the general license the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued on Friday amid the frantic attempts by the Trump Administration to arrest the surge in oil prices.
The waiver even allows “the importation into the United States of crude oil and petroleum products of Iranian origin,” in a highly unusual move, which analysts see as “funding the enemy.”
Related: The U.S. Just Took a Giant Step in The Rare Earth Race With China
The license “quietly opens that door” to U.S. importation of Iranian crude that has been prohibited for decades, says Max Meizlish, a research fellow for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD).
Other analysts and sanctions experts note that the license to buy Iranian crude loaded on vessels is unlikely to attract a different slate of customers than the typical Chinese teapot customer, due to the other Iran-related sanctions still in place and the uncertainty how low this waiver – currently until April 19 – would last.
By Tsvetana Paraskova for Oilprice.com
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