Last Wednesday, the US Treasury Department announced sanctions on five Chinese nationals and six entities, including two Cosco Shipping Corporation subsidiaries.
Washington is now facing backlash from the decision because the surge in freight costs has made US crude exports to Asia unprofitable, leaving exporters reluctant to book vessels at the higher rates.
According to traders and ship brokers cited by Reuters Wednesday, US Gulf Coast exporters are refusing to charter COSCO-owned vessels because of the sanctions.
Freight rates for Very Large Crude Carriers (VLCCs) which carry around 2 million barrels of oil surged to $9.8 million this week, up from $6.2 million in early September, the news agency said.
As a result, shipbrokers said, no transactions for supertankers from the US Gulf Coast to Asia have been executed this week.
The US has aggressively been pushing its oil on customers around the world after sanctioning Iran and Venezuela in what is seen by many observers as an energy war in the wider context of its trade war.
Asian refiners are already finding it hard to replace Iranian oil.
US allies begin to feel bite of US sanctions on Iran oilAn Indian refiner says it is scouring the world for ultra-heavy crude oil which is becoming short in supply because of intensified US sanctions on Iran and Venezuela.
Many traditional oil buyers are used to certain grades and their refineries are configured to process a large percentage of heavy, high sulfur crude in order to produce large quantities of gasoline, and low amounts of heavy fuel oil.
Such consumers have often invested in more complex refinery configurations which allow them to use cheaper feedstock and have a higher processing capability.
Last month, an Indian refiner said it was scouring the world for ultra-heavy crude oil which is becoming short in supply because of intensified US sanctions.
The US administration has pledged to bring Iran’s oil exports down to zero under its draconian sanctions imposed on May 2. However, Washington is shooting itself in the foot by sanctioning Asian buyers of Iranian oil such as China.
Beijing has said the US sanctions amount to “bullying” and defended its trade with Tehran as legitimate and legal.
“China’s resolve to develop relations with the Islamic Republic of Iran and implement agreements between the two countries will not change,” head of the Communist Party’s International Department Song Tao said in July.
He made the remarks after the US imposed sanctions on energy company Zhuhai Zhenrong, one of China’s largest state-backed oil companies for transporting Iranian crude oil.
Zhuhai Zhenrong which is already under US sanctions for supplying gasoline to Iran in 2012 has little overseas exposure.
Iran, for itself, has condemned Washington’s recent sanctions targeting China as “thuggish unilateralism” and “destructive economic terrorism”.