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In further reports published since Tuesday, oil tanker monitoring groups said a second Iranian tanker completed a delivery of 2 million barrels of oil to Chinese state-owned producer Sinopec in recent days.
Beijing has criticized the U.S. for implementing a unilateral ban on Iranian oil exports, but has not declared any purchases of crude from Iran since the ban took effect in May. In April, a Chinese foreign ministry spokesman said China’s economic ties with Tehran were “reasonable and legitimate.”
US sanctions
The U.S. re-imposed sanctions on Iranian oil last November and granted China and seven other governments waivers to keep importing a limited amount of crude from Iran until May. China previously had been Iran’s biggest oil customer.
In a Wednesday phone call with VOA Persian, Katherine Bauer, a former senior U.S. policy adviser for Iran in the Treasury Department’s Office of Terrorist Financing and Financial Crimes, said it appears that China is continuing to import a limited amount of Iranian crude as a return on Chinese investments in Iran’s energy industry, rather than purchasing the oil with cash.
“It is a gray area as to whether or not that (type of oil import) is subject to U.S. sanctions, because there is no purchase associated with it,” said Bauer, a fellow at the Washington Institute for Near East Policy.
Bauer said importing “equity barrels” of Iranian oil as a return on investment means China gets to demonstrate a continued economic relationship with Iran for the purpose of ensuring a stable supply of energy, while Beijing avoids making any statement about importing oil in violation of U.S. sanctions.
But John E. Smith, a former director of the Treasury Department’s Office of Foreign Assets Control (OFAC) under President Donald Trump, told VOA Persian that he does not see Chinese “return on investment” imports of Iranian oil as a gray area.
“The U.S. said that it would sanction any significant transactions involving the import of Iranian oil and it defined ‘significant transactions’ to be very broad to allow the U.S. to go after almost any type of behavior,” Smith said in a Wednesday phone interview. “If the U.S. declines to find barter or other types of arrangements to be a ‘significant transaction’ for the import of Iranian oil, then it leaves a gaping loophole for the continued import of Iranian oil around the world.”
Smith, a partner at global law firm Morrison & Foerster, said the Trump administration should move forward with sanctions against China for importing Iranian oil.
“In many respects, U.S. credibility and the power of U.S. sanctions are at stake,” he said. “If the administration says it will utilize sanctions for a particular behavior and it does not, then its sanctions can lose their impact around the world.”