By Tim Daiss
Tensions between Washington and Beijing could soon peak if China positions itself to defy President Trump’s repeal of Iranian oil sanctions waivers. On Saturday, noted Chinese analysts said that China might not submit to U.S. sanctions pressure over its Iranian oil imports because Iran is a key investor in China’s Belt and Road Initiative as well as a key energy partner.
Two weeks ago, the Trump Administration surprised both domestic and international energy markets players and watchers when it refused to extend 180-day waivers for Iranian oil first put in place in November. Washington also said it would place sanctions on any country that continues to buy Iranian oil after May 2. Japan, China, India, South Korea, Taiwan, Italy, Greece, and Turkey – all of Iran’s biggest oil clients – were initially granted 180-day waivers.
As a result of the U.S. move, London-traded, global oil benchmark Brent crude breached the psychologically important $75 per barrel price point. Since then, Brent has pared those gains by nearly $5 per barrel amid a host of factors, including a jump in U.S. crude inventories to their highest level since September 2017 as well as U.S. production hitting a record 12.3 million barrels per day (bpd), cementing its top global oil producer slot ahead of Russia and Saudi Arabia. Brent ended the trading session on Friday at just under $71 per barrel, while U.S. oil benchmark, NYMEX-traded West Texas Intermediate crude (WTI) futures ended the session at $61.94 per barrel, up 13 cents, but losing nearly 3 percent for the week, its second consecutive week of declines.
According to a report in the Beijing-based Global Times, experts in the country also said that China’s energy security wouldn’t be affected too much by the removal of oil sanctions waivers due to diversification of supply, while the issue could even offer Beijing a new bargaining chip in ongoing trade negotiations with Washington as both sides try to reach an agreement to end nearly a year of tit-for-tat trade tariffs. It should be noted that the Global Times is known for expressing hawkish views, sometimes in adherence with the official Chinese Communist Party (CCP) line and sometimes not.
“China has multiple overseas oil suppliers, so the U.S. sanctions won’t have a huge impact on China’s energy security,” said Bai Ming, deputy director of China’s Ministry of Commerce’s International Market Research Institute. Hua Liming, a Middle East studies expert and a former Chinese ambassador to Iran said “it [the removal of waivers] doesn’t mean China will submit to the U.S. and cut off its energy trade ties with Iran, because Iran is a key partner of China in economy, politics and security. According to state-run Xinhua news agency, Iranian oil imports make up some 6 percent of China’s total crude imports, making the Islamic Republic China’s seventh largest oil importer.
Others, however, at least internationally, offer a different take, claiming that Beijing will not damage its relations with Washington further by challenging the removal of the Iranian oil sanctions waivers.
Moreover, many claim that if China resists calls to end Iranian oil imports, it could jeopardize ongoing sensitive trade talks, which appear to be heading to successful conclusion.
Moreover, Japanese, Chinese, South Korean and Indian kowtow to U.S. pressure to stop importing Iranian oil will play into the hands of Saud Arabia, Russia, and other OPEC members as they battle for an increasing part of overall Asian and more especially Chinese oil market share.