News reports last week said China had bought 35 percent more Iranian oil in May than in April. But that reflected the end of a dispute between China and Iran over the terms of its oil purchases. China cut its Iranian oil purchases in half during the first quarter because of the dispute. Chinese sources said China demanded a 90-day grace period in which to pay for the oil whereas Iran held out for a 60-day grace period, the same as in the 2011 contracts with China.
Since that dispute was resolved, China has boosted its Iranian oil buys back to the levels of 2011. But it is buying much more from elsewhere. The accompanying chart shows how dramatically China has boosted its oil imports from several producers as of May (compared with the same month last year), while imports from Iran were down marginally.
Some analysts think this is partly a political decision. They argue that China will not dance to the American tune and buy less oil from Iran. At the same time, however, China will look elsewhere for the additional oil it needs and shun more purchases from Iran.
Still, China will likely buy less from Iran over the entire year. Its cutbacks in the first quarter were so deep that, even if China holds purchases through the remaining months of this year at last year’s levels, its annual imports from Iran will be down by about 12 percent.
“It looks like China plans to have its cake and eat it too,” said one analyst. “It will tell Iran it’s buying at the same monthly rate as last year and tell the Americans it has cut oil buys 12 percent.”
In the first half of last year, China bought an average of 543,000 barrels of Iranian oil daily—far more than other country. That was 22 percent of all of Iran’s oil exports.
China is one of just five countries the United States has not exempted from the sanctions that took legal effect Thursday. The other four countries—Indonesia, Pakistan, Singapore and the Philippines—are minor purchasers.
US Secretary of State Hillary Clinton last week held out the prospect that she might soon give a waiver to China. “We’ve seen China slowly but surely take actions,” Clinton said. “I have to certify under American laws whether or not countries are reducing their purchases of crude oil from Iran and I was able to certify that India was, Japan was, South Korea was. And, we think, based on the latest data, that China is also moving in that direction.”
But the day after Clinton spoke so positively, China’s latest import data showed it had boosted its imports in May by 35 percent compared to the April purchases.
