Iran and China on March 27 signed a sweeping 25-year trade and security cooperation pact that could lead to increased oil flows from Tehran to Beijing.
Source: S&P Global Platts, by Aresu Eqbali
The exact text of the deal was not released, but Iran’s semi-official Tasnim news agency reported that in exchange for greater access to Iranian oil, China pledged assistance and investment in Tehran’s energy sector, including fossil fuels, clean energy and nuclear.
“Based on this document, China will be a steady importer of Iran’s oil, and Iran should remove China’s concerns for return of its investment,” Tasnim said.
The deal — signed by the two countries’ foreign ministers — also calls for cooperation on banking, finance and insurance. China is Iran’s largest trading partner, with trade between the two countries totaling $18 billion in the Iranian year that ended March 20, the official IRNA news agency said.
“Relations with China are significant and strategic for Iran,” Iranian President Hassan Rouhani said after meeting with Chinese foreign minister Wang Yi, according to IRNA.
China has maintained some level of oil imports from Iran in the last few years, despite severe US sanctions that heavily penalize buyers of Iranian oil and blacklist them from the US financial system.
Due to the sanctions, Iran has resorted to increasingly creative methods to find outlets for its mainly heavy, sour crude, according to market sources.
Many of the country’s state-owned oil tankers have turned off their satellite tracking systems to cloak their shipments, and Iran is also using ship-to-ship transfers to sell its oil at ports in the Persian Gulf and parts of Southeast Asia around Malaysia and Indonesia.
Iranian crude production has risen in recent months, hitting 2.14 million b/d in February, according to the latest S&P Global Platts survey of OPEC output — a 190,000 b/d increase from a 33-year low of 1.95 million b/d in August.
Iran’s oil exports to China have likewise seen an uptick, market sources say.
Data intelligence firm Kpler estimates Iran will export some 896,000 b/d of crude oil and dirty petroleum products to China in March, up from 406,000 b/d in February and the highest level since April 2019.
In comments during his meeting with Rouhani, Wang urged the US to lift its sanctions on Iran and return to the nuclear deal. The US withdrew from the deal in 2018 under then-President Donald Trump, but the new administration of President Joe Biden has indicated a willingness to re-enter the agreement.
China would welcome such a move, Wang said, according to state media.
“The JCPOA should be implemented precisely,” Wang said, using the acronym for the nuclear deal. “The US should cancel the sanctions against Iran and return to the JCPOA … and commit that it will not take such measures in the future.”