US warns China it will enforce sanctions on Iran oil shipments

The Biden administration has told Beijing it will enforce Trump-era sanctions against Iranian oil as shipments from the Islamic regime to China have soared, a senior US official said.

Iranian oil exports to China have been increasing “for some time now”, the senior administration official familiar with the Iran issue told the Financial Times in an interview.

Some observers had questioned whether the rise indicated that the Biden administration was turning a blind eye to the trade in an effort to encourage Tehran to join negotiations over a 2015 nuclear accord that the US abandoned in 2018. The Biden administration has made returning to the deal a priority.

“We’ve told the Chinese that we will continue to enforce our sanctions,” the senior administration official said. “There will be no tacit green light.” The official indicated that sanctions could be waived during hoped-for talks between Washington and Tehran to revive the multi-party nuclear deal.

Enforcing the prohibition could take the form of “secondary sanctions”. In 2019, the Trump administration imposed sanctions on a Chinese state-run energy company and several tanker companies it said were trading Iranian oil in violation of US restrictions. China’s embassy in Washington did not immediately reply to a request for comment.

Ultimately, our goal is not to enforce the sanctions; it is to get to the point where we lift sanctions and Iran reverses its nuclear steps

The comments come as US secretary of state Antony Blinken and national security adviser Jake Sullivan are due to meet their Chinese counterparts in Alaska on Thursday for the first time since they took office.

China imported about 478,000 barrels of oil a day from Iran on average in February, according to data from energy research company Kpler, and this is expected to increase to about 1m b/d in March — one of the highest monthly purchases on record. Iran had been offering steep discounts, energy analysts said.

Iran’s ghost tankers are notoriously difficult to track and often include exports of petroleum products as well as crude oil that has been stored at sea for months, said Amrita Sen of consultancy Energy Aspects. “We always knew these barrels would come out; it was a question of when.”

Iran had exported crude and condensate — an ultralight oil — to China by disguising its barrels most recently as Omani ones, Kpler said this week. Four tankers removed their transponders and transferred them to other vessels at an Omani port. They then went to Iran to load almost 8m barrels of oil collectively after which they returned to Oman to pick up the transponders on the way to China.

Iran’s economy has been devastated by US sanctions and Covid-19 but Iranian traders have said they are seeing signs of new business. “Many foreign companies are no longer scared of sanctions since Biden has been elected,” said a senior petrochemicals trader.

The nuclear agreement, which was also signed by China as well as France, Germany, the UK and Russia, gave sanctions relief in exchange for imposing limits on Iran’s nuclear programme. Washington and Tehran have both indicated they want to revive the nuclear pact. But neither side wants to take the first step. Since Trump withdrew from the pact, Iran has stopped complying with many of its terms.

Blinken testified to Congress last week that the US would not give sanctions relief until Iran was verifiably in full compliance with the deal or was on what one lawmaker called “a negotiated path toward full compliance”.

The senior official said the US could relieve sanctions if Washington reached understanding with Tehran “either as part of a mutual set of steps or as part of a full return into compliance” with the 2015 nuclear accord. “Ultimately, our goal is not to enforce the sanctions; it is to get to the point where we lift sanctions and Iran reverses its nuclear steps,” said the official.

Besides lifting oil sanctions, a pre-arranged incremental sequence could also include the US officially permitting the return of billions of dollars in frozen Iranian funds held in South Korea. “This [the frozen funds] is precisely the kind of issue we believe we should be discussing in the context of a mutual way back into compliance with the deal,” said the official.

“Far better than us focusing on sanctions enforcement and China focusing on sanctions evasion would be to get on a more productive course, which is for the US to lift sanctions and Iran to reverse its nuclear steps,” said the official, who added: “We’re not going to make a religion out of the format.”

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