China restarts purchases of Iranian oil, bucking Trump’s sanctions

Bourse and Bazaar | Esfandyar Batmanghelidj: On the same day that Iranian foreign minister Javad Zarif traveled to Beijing for talks on “regional and international issues,” the Chinese oil tanker PACIFIC BRAVO began traveling eastward, having loaded approximately 2 million barrels of Iranian oil from the Soroosh and Kharg terminals in the Persian Gulf over the past few days, according to analysis provided by

PACIFIC BRAVO is currently reporting its destination as Indonesia, but the tanker was recently acquired by Bank of Kunlun, a financial institution that is owned by the Chinese state oil company CNPC. believes China is the ultimate destination for the oil on board.

PACIFIC BRAVO is the first major tanker to load Iranian crude after the Trump administration revoked waivers permitting the purchases by eight of Iran’s oil customers. The revocation of the waivers, which sent shockwaves through the global oil market, was a major escalation of Trump’s “maximum pressure” campaign on Iran.

The purchase of Iranian oil in the absence of a waiver exposes the companies involved in the transaction—including the tanker operator, refinery customer, and bank—to possible designation by the U.S. Treasury Department, threatening the links these companies may maintain with the U.S. financial system.

Bank of Kunlun has long been the financial institution at heart of China-Iran bilateral trade—a role for which the company was sanctioned during the Obama administration. Despite already being designated, Bank of Kunlun ceased its Iran-related activities in early May when the oil waivers were revoked. PACIFIC BRAVO’s moves point to a change in policy.

China-Iran trade slowed dramatically after the reimposition of U.S. secondary sanctions in November, suggesting the Chinese government had chosen to subordinate its economic relations with Iran to the much more important issue of its ongoing trade negotiations with the United States. But these negotiations have since broken down. This week, President Trump announced plans to impose tariffs on a further $300 billion in Chinese imports in addition to punitive measures against Chinese telecommunications giant Huawei, which has been targeted in part for its alleged violations of Iran sanctions.

These announcements stoked anger in China, which has vowed to fight back. Last week, foreign ministry spokesman Geng Shuang told reporters that China “resolutely opposes” unilateral sanctions on Iran. But until now, there had been little evidence that the Chinese government was encouraging its companies to ignore or evade U.S. sanctions in the interest of maintaining trade with Iran. While Chinese multinationals will likely remain wary of trading with Iran due to the risks posed to their increasingly global businesses, China’s apparent decision to use state-enterprises to purchase at least some Iranian oil represents a direct and significant challenge to U.S. sanctions. Earlier this week, Trump trade advisor Peter Navarro singled out China’s sanctionable activities in Iran’s metals industry in a Financial Times op-ed. With this kind of messaging, the Trump administration has made it impossible for China to keep the trade war separate from its disagreements with the United States over Iran sanctions.

For Iran, China’s decision to continue to purchase at least some Iranian oil could prove a vital lifeline as it struggles to withstand the Trump administration’s “maximum pressure” sanctions campaign. The failure of Europe, China, and Russia—the remaining parties of the Iran nuclear deal—led Iran to announce last week that it would begin to reduce its compliance with parts of the Joint Comprehensive Plan of Action (JCPOA) in 60 days.

Iran’s announcement greatly concerned European officials who have urged continued compliance with nuclear commitments under the JCPOA. In private, European officials acknowledge that the decision by the Trump administration to revoke the oil waivers was a significant escalation to which Iran was compelled to respond. Noting that economic pressures are fueling political opposition to the JCPOA in Tehran, European officials have been urging Chinese and Russian counterparts to do more to support bilateral economic ties with Iran. Dispatching PACIFIC BRAVO may be just the first step.