March 15, 2019
Trade with China, expected to be Iran’s ace-in-the-hole and savior from US sanctions, is plummeting.
According to customs data from China, exports to Iran in January hit $722 million – down 58.3 percent compared to the same month in the previous year.
As for Iranian exports to the world’s second largest economy, including oil, they fell to $1.012 billion, which was 51.9 percent lower year-on-year.
Tehran’s Financial Tribune cited a gamut of factors, including hurdles in Iran like stringent foreign exchange controls. But the main impediment is seen as the banking restrictions that are part of US economic restrictions.
China’s Bank of Kunlun—the main conduit for Iran trade—officially resumed its transactions with Iran in December after a one-month break. But its scope of work fell short of what Iranian businesspeople had hoped for. The bank strictly abides by the US sanctions regime.
In a notice that Bank of Kunlun sent to Iranian banks, it outlined its new Iran policy. It made clear that it would process “only humanitarian goods and non-sanctioned goods and services between Iran and China.”
“We hereby inform your good bank that our bank is able to resume business cooperation with Iranian banks, which are not subject to secondary sanctions by OFAC,” reads the text of the notice sent to Iranian lenders.
Bank of Kunlun was established in 2006 as a commercial city bank in Karamay. The bank was later selected by the government in Beijing as its main bank to process oil payments to Iran, shielding other banks from penalties under western sanctions between 2010 and 2015. The US Treasury sanctioned Kunlun in 2012 for conducting business with Iran.
“During the previous round of sanctions, China tried to accommodate us and therefore Bank of Kunlun was set up by CNPC [China National Petroleum Corporation]. But this time around, because CNPC has made investments in America through various projects and over 70 percent of Kunlun’s shares belong to CNPC, they are under pressure not to work with Iran, and the bank has decided to only handle humanitarian trade with Iran,” Ferial Mostofi, the head of Investment Attraction Services Center at Tehran Chamber of Commerce told the Financial Tribune.
The newspaper said another impediment to Iran-China trade is the latter’s compliance with anti-money laundering rules set by the inter-governmental Financial Action Task Force (FATF).
Majid-Reza Hariri, vice president of the Iran-China Chamber of Commerce. says FATF countermeasures against Iran have been a major factor behind the declining trade ties, while qualifying that “domestic controls” like Iran’s many import bans and foreign exchange restrictions are also to blame.
