July 19, 2019
The US State Department is looking at a special deal for China that would allow it to continue importing substantial amounts of Iranian oil—but would not allow Iran to get any revenue for that oil.
Iran is in debt to China and has been paying off that debt with oil deliveries totaling about 250,000 barrels a day. The idea the State Department is mulling is a waiver for China that would allow it to take that much Iranian oil—for free—without incurring any US sanctions.
That would be a great deal for China—but not much of a deal for Iran, which is in desperate need of cash.
Politico said the Trump team has kept the details of its deliberations closely held as news reports of continuing Chinese imports of Iranian oil started circulating late in June.
Republican hawks on Capitol Hill have begun to ask questions. It is the latest in a series of dust-ups between the administration and Congress on an Iran policy that has often appeared inconsistent, careening between threats of military action and offers to talk with Iranian leaders.
One of the many US sanctions laws very clearly targets oil purchases, rather than imports of Iranian oil. That is what the lawyers are focused on.
The Iranian debt is owed to the Chinese oil company Sinopec in repayment for its investments in an Iranian oil field.
Much of the rhetoric from the State Department has specified that the US is targeting purchases — rather than imports — of Iranian oil, a word choice that has passed with few noticing the distinction. For example, on June 28, Brian Hook, the senior State Department official handling Iran issues, told reporters, “We will sanction any illicit purchases of Iranian crude oil.”
The recent Chinese imports were first reported by the website TankerTrackers.com, which uses satellite technology to track ships. The news reports—but not the purchase/import distinction—caught the attention of some Republicans in Congress.
“The Administration stopped issuing sanctions waivers for Iranian oil exports in May, yet China just received a massive oil cargo from Iran,” Sen. Marco Rubio of Florida tweeted at the end of June. “The tanker Saline, capable of carrying 1 million barrels, docked in Jianzhou Bay on June 20.”
The State Department declined to comment on the imports, but said the department “is in regular contact with Beijing regarding our maximum economic pressure campaign on the Iranian regime.”
In May, the US declined to renew past waivers allowing China and several other countries to buy Iranian oil. China protested at the time, arguing that the move would drive up oil prices. The price of an OPEC barrel was $72 on May 1, but is now around $65, down 10 percent, despite the US tightening of sanctions.
Politico said the State Department might have created the workaround because it has few options for punishing China is it defies Washington. But it is a minimal concession since it does nothing to benefit Iran.
“If the Trump Administration did give permission to allow Iran to repay China in-kind for debts owed for past work by Chinese oil companies in Iran, it could actually advance the Trump Administration’s policy,” said Elizabeth Rosenberg, a senior fellow at the Center for New American Security. “That is, Iran’s exports would deprive Iran of valuable assets and further impoverish the struggling state.”