China slams US ‘bullying’ after new Iran oil sanctions

Foreign Ministry spokeswoman Hua Chunying said on Tuesday China strongly opposes the hostile measures against energy company Zhuhai Zhenrong Co Ltd.

“We are opposed to the US bullying behavior of wantonly cracking down, suppressing and sanctioning Chinese companies and individuals based on US domestic law. We are firmly opposed to it and strongly condemn it,” she said.

On Monday, US Secretary of State Mike Pompeo said the Chinese company had “knowingly engaged in a significant transaction for the purchase or acquisition of crude oil from Iran”.

“We strongly urge the US to immediately rectify its wrong behavior, and stop imposing illegal sanctions against Chinese companies and individuals. China will take all necessary measures to firmly preserve the legitimate rights and interests of Chinese companies and individuals,” Hua said. 

Zhuhai Zhenrong is one of China’s largest state-backed oil companies for transporting Iranian crude oil.

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

However, Zhuhai Zhenrong which is already under US sanctions for supplying gasoline to Iran in 2012 has little overseas exposure.  

Energy traders said the company is also largely disconnected from the Chinese financial system, which would limit the “contagion” of the sanctions to other entities and banking systems.

Trade war to flare up 

The sanctions, nevertheless, are likely to inflame tensions between the United States and China which are locked in a trade war.

China is Iran’s largest oil importer and fiercely opposed to the US sanctions which have failed to stop shipments from the Middle Eastern energy powerhouse.

Iranian oil flow to China has continued since May when the Trump administration scrapped waivers which allowed eight countries to keep buying from Iran.

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 and accounts for more than 60% of China’s trade with the Islamic Republic, according to its website.

It was the sole importer of Iranian crude into China 25 years when the company established trade with Iran. Now, it is the first Chinese oil company to face sanctions since the US ended the exemptions.

In 2012, when the Obama administration slapped the company with sanctions, Zhuhai Zhenrong said it would continue to import crude from Iran, and that the sanctions would not affect it because it had little business with any US firm.

The company joins several Chinese aluminum producers which were recently slapped with US sanctions over trade with Iran.

China’s embassy in Washington rejected the US decision.

“China firmly opposes the US imposition of unilateral sanctions and so-called ‘long-arm jurisdiction’ on China and other countries invoking its domestic law,” a spokesperson said, cited by Reuters.

“We urge the US to immediately correct its wrongdoing and earnestly respect other parties’ legal rights and interests.”

Last August, the US re-enacted its secondary sanctions against Iran’s steel and aluminum products, gold and precious metals, graphite and coal to choke off the country’s vital revenue streams.

Beijing has pushed back against the United States, saying China’s cooperation with Iran is legitimate under international law and should be “respected”.

The two economic superpowers are engaged in an escalating trade war since last year, which has seen them impose tariffs on hundred of billions of dollars worth of each other’s goods.

“A further escalation in US tariffs on Chinese goods could jointly drive global economic growth a lot lower and encourage Iran-China cooperation,” Bank of America Merrill Lynch said in a June note.

According to Bloomberg, tankers are offloading millions of barrels of Iranian oil into storage tanks at Chinese ports, creating a hoard of crude sitting on the doorstep of the world’s biggest buyer.

Two and a half months after the White House banned the purchase of Iran’s oil, the nation’s crude is continuing to be sent to China where it’s being put into what’s known as “bonded storage”, the financial news provider said.

This supply doesn’t cross local customs or show up in the nation’s import data, and isn’t necessarily in breach of sanctions, it added.

Bloomberg said at least ten very large crude carriers and two smaller vessels owned by the state-run National Iranian Oil Company and its shipping arm are currently sailing toward the Asian nation or idling off its coast. They have a combined carrying capacity of over 20 million barrels.