China’s two largest oil companies, CNPC and Sinopec have not ordered any Iranian oil cargoes to load this month after the expiry of the sanction waivers Washington had granted China and seven other Iranian oil importers, Reuters reports, citing unnamed sources.
The news comes despite statements from Beijing that it will not comply with the U.S. sanctions against Iran and will continue trading with the country including buying crude oil from it. China is the biggest buyer of Iranian crude, most recently at a rate of 475,000 bpd, over the first quarter of 2019. That amount is above the quota that the U.S. assigned to China as part of the waiver.
The Reuters sources said, however, that the refiners are worried about sanction violation penalties as both have enough exposure to the U.S. banking system to be vulnerable to such penalties. Even so, one of the sources said, Sinopec was unwilling to breach its long-term supply contract with Tehran. This probably means the company will look for ways to circumvent sanctions.
Meanwhile, all of Iran’s oil clients are looking for alternatives, and they are finding them, but at a higher price: Saudi Arabia, Iraq, and the UAE were quick to assure the market they would step in and boost exports to fill the Iranian oil gap after the U.S. announced that no waivers would be renewed. Soon after, Saudi Arabia said it would hike prices for Asian clients for June delivery shipments in response to requests for additional deliveries. Higher prices are not something that would make either China or India happy, but their options are limited.
Despite Washington’s determination to completely stop the flow of oil from Iran to foreign markets, few believe that the zero-export target is achievable, even though the sanctions have done some considerable damage to Iran’s coffers. The U.S. special envoy for Iran Brian Hook last month estimated the losses suffered by Tehran in oil revenues at US$10 billion.