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Last Updated:[10-08-2010 02:38:19 EDT] Zoom in Zoom out Back to Tradenews

China Okays Iran Sanctions – Yet Holds Trade with Impunity

tradenews The recent sanctions against Iran hammered out by the US and like-minded countries targeting energy and banking sectors have become more blatantly farcical when China resumed oil trade with Iran even after the embargo came into effect. Desperate moves by Tehran to forge ties with China, the second largest oil consumer, indicate that the latter would be in a position to fish in troubled waters in the absence of competition from energy-starved nations following sanctions.

Iran's Oil Minister Massoud Mirkazemi met the Chinese vice Premier Li Keqiang in Beijing last week, and agreed on enhancing relations between the two nations, especially in the oil and gas sector. Li Keqiang is reported to have told the visiting Iranian oil minister that Beijing would maintain co-operation with Tehran on existing projects.

It should be recalled that last month, the Deputy Oil Minister Hossein Noghrekar Shirazi told the state-run Mehr news agency the Chinese companies were already involved in energy exploration and production projects in Iran worth about $29bn, and in refining and related activities at about $10bn.

Interestingly, some reports say that even Russia is not far behind China in cashing in on Iran embargo. Rajab Safarov, head of the Iran Commission of the Moscow Chamber of Commerce and Industry informed Russian companies were discussing "serious deliveries" to Iran in late August or September.

The US and the EU had made repeated requests to China and Russia to comprehensively honor sanctions against Iran. However, despite approval to sanctions both countries have differences on the scale of punitive measures slapped on nuclear interests of Iran.

"Sanctions are not considered an effective tool... and they will only complicate the situation" was the reaction from foreign ministry spokesman Ramin Mehmanparast last month as quoted by the state news agency IRNA. Likewise, Mirkazemi has also told at that point "European oil companies has no presence (in Iran's energy sector) and so they cannot have any impact on us", in a response to the EU's recent oil sanctions.

If China and Russia continue trade with Iran, sanctions not only become meaningless but also jeopardize business prospects of other countries, including that of India which has massive ongoing and some in the pipeline oil trade deals with Iran. Bloomberg reported sanctions were forcing refiners such as India's Reliance Industries to pay higher costs to ship gasoline to more distant markets. According to Simpson, Spence & Young Ltd., the world's second-largest shipbroker, India to the US shipping costs, at $1.9mn, are almost five times higher than those to the Persian Gulf.

"It's boom time for Russian and Chinese oil traders," said Michael Swangard, a London-based international trade lawyer at Clyde & Co., which counts BP and Lloyds of London among its clients. It's "practically impossible" for Europeans to buy Iran's oil or sell it, he said.

According to Chinese customs data, in the first half of 2010, Iran held its place as China's third biggest supplier of crude with shipments of 9mn tons of oil, putting it behind Saudi Arabia and Angola.

By Jose Roy

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