US sanctions Chinese company over Iran crude oil

US sanctions Chinese company over Iran crude oil

The US has issued sanctions against one of China’s largest state-backed oil companies for transporting Iranian crude oil as Washington ratchets up the pressure on Tehran.

The Chinese company Zhuhai Zhenrong and its chief executive, Youmin Li, will be barred from engaging in foreign exchange, banking or property transactions under US jurisdiction.

The US has sought to force Iranian oil exports to zero as part of its “maximum pressure” campaign to inflict economic pain on Tehran following America’s withdrawal from the Obama-era nuclear deal last year.

In May the Trump administration said it would not renew the waivers issued to several countries, including China, that allowed them to circumvent US sanctions and continue importing Iranian oil.

China, whose oil companies are among Iran’s biggest customers, quickly emerged as the chief opponent to this move — although it initially reduced its purchases of crude following Washington’s waiver withdrawals.

But it has quietly continued importing Iranian oil. Last month China received its first delivery of an Iranian oil cargo since the Trump administration scrapped exemptions.

Zhuhai Zhenrong has strong links to Iran, having been established 25 years ago as the then-sole importer of Iranian crude into the China.

Unlike other Chinese state-backed oil dealers, however, Zhuhai Zhenrong has little overseas exposure, likely insulating it from the most damaging effect of US sanctions. The company was already slapped with US sanctions for supplying gasoline to Iran in 2012.

It has been unclear how willing the US would be to punish Chinese companies over breaches of Iranian oil sanctions, especially as Washington and Beijing remain locked in talks over a trade deal.

Brian Hook, the US’s Iran envoy, told reporters in April that the US would “sanction any sanctionable behaviour”. But when asked if that included Chinese companies, he responded: “I didn’t say that.”

Tensions between Tehran and Washington have escalated in recent weeks. Last week US president Donald Trump said America had shot down an Iranian drone in the Strait of Hormuz after it threatened a US warship. Iranian officials said that no drone had been lost.

Almost 24 hours later, Iran’s Revolutionary Guards seized a UK-linked tanker in the Strait, while temporarily stopping and boarding another.

Tensions with Iran have supported oil prices in recent months, with prices jumping 1.4 per cent on Monday to $63.31 a barrel following the seizure of a UK-flagged tanker. But the overall oil market remains relatively well-supplied, to the extent some traders believe that prices could fall sharply if China steps up purchases of Iranian crude.

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