Tensions in the Middle East are increasing. Sanctions are intended to hit Iran's economy, but Tehran rakes in billions by exporting oil to China.
Tehran – Before Russia attacked Ukraine, Iran was the most heavily sanctioned country in the world. Tehran has had years of practice circumventing economic restrictions. After Iran's major attack on Israel last weekend, the EU and the USA want to further tighten sanctions against Tehran. Meanwhile, revenue from crude oil is currently at a record level. The most important buyer of Iranian oil: China.
Price discounts for China: Tehran and Beijing strengthen trade relations
Iran's oil exports are at their highest level in six years, the
Financial Times
reported on Thursday (April 18). For the Iranian economy, this means an increase of 35 billion US dollars, the equivalent of around 33 billion euros. Tehran sold an average of 1.56 million barrels per day in the first three months of this year. For comparison: According to analysts at Ceic, the previous peak of Iranian oil exports was 2.68 million barrels per day in 2004. Currently, practically all of Iran's oil exports go to China, according to the tracking service Kpler, which has been keeping an eye on Iran's shadow fleet for years.
According to this, Beijing sources around ten percent of its total oil imports from Tehran. Overall, China is Iran's most important trading partner. The two countries signed an agreement in March 2021 to “strengthen their long-standing economic and political alliance,” according to the Iranian news agency Tasnim. Apparently there is a discount for Beijing: According to the Reuters news agency, China was able to get a barrel of Brent for ten US dollars below the usual price on the world market for a long time, most recently the discount fell to five US dollars per barrel.
USA is planning further sanctions against Iran: Biden also has an election campaign in mind
The West's numerous sanctions against Tehran do not appear to be having the desired effect. With the help of oil tankers that switch off or manipulate their transponders, Iran apparently manages to circumvent the economic restrictions. “Despite strict financial restrictions, Iran managed to increase its crude oil production by 140,000 barrels per day in 2022 [...],” says the International Energy Agency IEA's 2023 oil report.
The US announced new sanctions against Iran on Tuesday. According to details published by the US Treasury Department on Thursday, the restrictions are primarily aimed at Iran's missile and drone program as well as the steel and auto industries. US Treasury Secretary Janet Yellen admitted last week that “more needs to be done” to curb Iranian oil trade. “The Iranians have mastered the art of sanctions evasion,” Fernando Ferreira of Rapidan Energy Group told the
Financial Times
. “If the Biden administration really wants to make a difference, it needs to shift the focus to China.”
However, in view of the upcoming presidential elections in the USA, US President Joe Biden could be reluctant to cut global oil supplies. “Nothing scares a sitting American president more than a spike in gasoline prices during an election year,” Bob McNally, former White House energy adviser, recently commented. Aggressive enforcement of sanctions could destabilize not only the oil market, but also relations between the US and China, Kpler also told the
Financial Times
.