China is paying for at least part of its Iranian oil purchases in renminbi, the Chinese currency. Iran has long proposed using local currency and avoiding the dollar when it buys a lot from a country.
Iran has not been wild about being paid by India in rupees because Iran buys very little from India and those rupees could just pile up. Iran agreed some months back to accept rupees for 45 percent of the oil it sells India.
But an Indian commercial delegation that visited Iran several weeks ago produced very few trade contracts. An Iranian trade delegation is now in India, but Indian news reports say it isn’t accomplishing much either.
Iran buys a lot from China, however, and so oil sales in renminbi make a lot of sense. Normally, the renminbi would be deposited in an account in China and then used by Iran to pay for its imports of Chinese goods.
That is just what was done initially. But the Financial Times said major Chinese banks, like the giant Bank of China, expressed fears that they would come under US sanctions, which would endanger the much greater business they do with the United States. The Chinese banks then refused to deal with Iran any more.
As a result, the Financial Times said, several months ago Chinese oil buyers began paying renminbi for their oil imports to Iran through Russian banks. No specific banks were named.
This arrangement is a little more complicated than the old one, but workable.
The Financial Times cited unnamed Chinese oil industry executives as its sources.
Reuters asked Iran’s ambassador to the UAE, Mohammad-Reza Fayyaz, if the Financial Times story was accurate. “Yes, that is correct,” he replied.
Chinese customs data show that Chinese imports of Iranian oil during the first quarter of this year were down 33 percent compared with the first quarter of last year, indicating that Chinese buyers probably do not wish to be as dependent on Iranian oil as in the past.