China Increasing Efforts to Buy Iranian Oil, Evade US Sanctions, Congressional Commission Says

China has doubled down on efforts to illegally buy oil from Iran due to expectations that the Biden administration is close to easing sanctions on Iran (see 2106240044), the U.S.-China Economic Security Review Commission said in a June 28 report. Since late 2020, China has “significantly” increased its purchases of Iranian oil “with falsified identification from countries” such as Malaysia, the United Arab Emirates and Oman, according to the report, which cites data published by Refinitiv.

The report said “various circumvention methods have allowed China to continue purchasing Iranian oil in violation” of U.S. sanctions. China uses third-country tankers to deliver the oil to their destinations and stockpiles oil deliveries at Chinese ports in bonded storage to “avoid processing” the oil through China’s customs agency. These methods allow China to import mostly crude oil from Iran, the commission said. China also exports valued-added manufactured goods, including machinery and industrial equipment, to Iran, the report said. “As Iran’s primary oil customer,” the report said, “China provides an economic lifeline to the Iranian regime while deepening its leverage over the country.”

Although public data shows China and Iran continue to trade heavily, official Chinese import data shows the country has “significantly” reduced Iranian oil imports since 2019, “suggesting Beijing was calibrating its sanctions compliance to avoid triggering penalties from Washington.” The report also said U.S. sanctions affected China’s commercial industry and prompted prominent Chinese technology firms, including Huawei, to reduce their operations in Iran.

And although China historically has been one of Iran’s top foreign investors, U.S. sanctions have stymied many of the investment projects, the commission said. Iran announced only three new foreign investment projects in its energy sector between 2019 and 2020, the report said, and has seen a “steady decline” in foreign direct investment inflows.

But Chinese oil trade with Iran remains strong, the commission said. “In continuing to purchase Iranian oil, Chinese companies knowingly violate U.S. sanctions on Iran and continue to support the Iranian regime,” it said. “[M]any observers assert that China continues to import substantial amounts of Iranian oil through various obfuscation and sanctions circumvention methods.”