As trade tensions between China and the U.S. continue to escalate, another piece of news has come out that has further jeopardized international financial markets.
The Trump administration has been tracking the movement of oil tankers linked to China’s largest state-run oil company. What they have found out is that many of these vessels have been transporting Iranian oil to China in open defiance of US sanctions against the nation.
Specifically, a subsidiary of the China National Petroleum Corporation called Bank of Kunlun has employed a fleet of tankers in recent months to move oil from Iran to China. At least three Kunlun-linked tankers have been spotted interacting with Iranian ships since May according to satellite imagery which was provided to the Financial Times.
“The data and imagery clearly suggests that these tankers, all of which have been linked to the Bank of Kunlun, are involved in transporting Iranian oil. These tankers are acting as a bridge between Iran and China,” said Samir Madani of TankerTrackers. “Any entity considering evading our restrictions, particularly related to Iranian petrochemicals, should take this message seriously,” added another official. “We recently sanctioned Zhuhai Zhenrong . . . for knowingly engaging in a significant transaction for the purchase or acquisition of crude oil from Iran. This action underscores our commitment to enforcement.”
Washington is currently trying to block all exports of Iranian oil to exert as much pressure as possible in an effort to force Tehran to negotiate over its domestic nuclear policy.
However, it’s uncertain whether the U.S. is willing to go so far as to strike back against China for this. Any decision made by America to target the Chinese Petroleum giant would mark a significant escalation in what is already a tense situation between both countries.
Intelligence experts have gone on to add that the Bank of Kunlun has historically acted as a “sacrificial lamb” for the CNPC and the Chinese government by extension. It’s an institution that the government sees as being expendable in many cases, often being involved in controversial matters so that other parts of the government don’t have to get their hands dirty. The Bank of Kunlun has taken significant efforts to hide the origin of these shipments. At least four Kunlun-owned tankers have undergone significant alterations to hide their identities, including changing their names in order to prevent maritime tracking.
Last year, the U.S. gave China and other countries until May 2019 to cut imports from Iranian oil to zero or face sanctions themselves. According to data from the Chinese government, the nation imported 7.9 million barrels in May and 6.3 million barrels in June, a significant downturn from the previous average of 16.7 million barrels imported from Iran in each of the first four months of 2019.
However, Washington hasn’t been able to convince China to completely eliminate oil imports from the middle-eastern country, due in no small part to the mounting tensions between the two countries.
Some experts have gone on to say that should China continue to buy Iranian oil, prices for the energy commodity could fall to as low as $30 per barrel. Time will tell whether or not that will turn out to be the case.
