$1 Billion Oil Stranded In China As U.S. Sanctions Hardens On Iran

Iran Oil Sanctions
FILE PHOTO: A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005. (Photo: ReutersREUTERS/Raheb Homavandi/File Photo/File Photo)

Around 20 million barrels if Iranian oil appeared stranded in China's shores in the Northeast port Dalian for the past six months as the United States intensifies its sanctions on the imports of crude from Iran.

The barrels of oil were sent by Iran to China before the United States reintroduced the sanctions last November. The oil was sent to the biggest consumer of Iranian oil as Tehran looked for alternative storage for a backlog of crude at home.

The oil remained behind Chinese customs clearance since it is being held in so-called bonded storage tanks at the port. The United States imposed a six-month clearance starting this month that will allow China to continue some Iranian imports. Shipping data, however, showed that little of the oil has been moved.

Traders and refinery sources are uncertain of the terms of the waiver and the independent refiners failed to secure payment or insurance channels. State refiners suffered in finding vessels for their oil. The estimated amount of crude stored in China is around $1 billion at current prices. The certainty of moving the crude remained unclear after the United States increased its pressure on Iran last week. The western nation announced that it will end all sanction exemptions at the start of May.

Tilak Doshi of oil and gas consultancy Muse, Stancil & Co in Singapore said that no responsible Chinese company with any international exposure will have anything to do with Iran oil unless they are specifically told by the Chinese government to do so.

In 2014, Iran stored oil at the Dalian port in China during the last round of sanctions that was later sold to South Korean and Indian buyers. China questioned the United States over the unilateral Iran sanctions. The United States stood firm in its decision of not providing a short-term waiver or a wind-down period.

Recently, United States Secretary of State Mike Pompeo said that the trade talks with China will not be affected by the end of Iran oil waivers this week. He said that they had lots of talks with China about this issue and he is confident that the trade talks will continue and run their natural course.

He added that they are convinced they can make sure the markets are adequately supplied and they are continuing to work on that. He also said that companies that choose to violate the sanctions will be pursued and they will ensure that they are held accountable for the violations they engage in.

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