x Abu Dhabi, UAEMonday 24 July 2017

China 'supplying Iran with petrol'

China is reported to be a major supplier of fuel to Iran as Tehran seeks to sidestep possible sanctions on its petrol imports.

China is reported to be a major supplier of fuel to Iran as Tehran seeks to sidestep possible sanctions on its petrol imports. Although its crude oil reserves are the second largest in the world, the Islamic Republic imports about 40 per cent of its petrol because it lacks refining capacity and analysts say proposed US sanctions targeting Iran's suppliers are a significant threat to the economy.

In a series of recent deals with Venezuela, Syria and now China, Tehran has sought to secure enough petrol to cover its needs until it can build up domestic refinery capacity, said Samuel Ciszuk, a Middle East energy analyst at IHS Global Insight. "Even if we see some sanctions come out of the US, this will buy them crucial months, maybe half a year," he said of the fuel purchases from China. "Within a few years' time they might have sufficient refining capacity on stream."

Iran has been importing petrol indirectly from China for at least a year, Reuters reported on Wednesday, citing oil traders who spoke on condition of anonymity. On Tuesday, the Financial Times reported estimates that Iran was importing between 30,000 and 40,000 barrels per day (bpd) of petrol indirectly from China through Singapore, an oil trading hub. Reuters on Wednesday reported that two of China's top refiners and oil trading companies denied selling petrol to Iran.

The reports follow Iran's announcement that it would build an oil refinery in Syria in partnership with Venezuela and Malaysia and the signing of a petrol-import deal with Venezuela. To put pressure on Iran to give up its nuclear programme, the US and other western powers have proposed that the UN adopt new sanctions that bar oil firms from selling petrol to Iran. US officials have threatened to impose the sanctions unilaterally if Iranian officials refuse to make concessions in face-to-face talks scheduled for next Thursday.

Iran says its nuclear programme is for peaceful purposes. The country is pushing forward with plans to build large refineries but in the next few years it will continue to rely heavily on imports leaving it vulnerable to sanctions, analysts say. In May, Reliance, the Indian refiner, suspended fuel sales to Iran in what was widely seen as a reaction to US pressure. Chinese firms now represent the most secure fuel source for Iran, Mr Ciszuk said, but they too could give up on the market.

"China has been one of the two main sceptics about sanctions against Iran," he said. "In the end it will all boil down to US pressure to get China to give this up or not. China may use it as a bargaining tool with the US and abandon Iran further down the line, there's no guarantee." The reports about Chinese imports come two weeks after Iran announced a preliminary import deal with Venezuela in which it would buy 20,000 bpd of petrol. Iranian officials on Wednesday also emphasised plans to build a refinery in Syria, according to Iran's PressTV. Officials did not say when construction would begin, it reported. The refinery, first announced in 2006, would process 140,000 bpd of crude oil.

Mr Ciszuk had doubts it would be built. "Where does Iran have the money to do that," he said. "They need all the money within their borders to deal with potential sanctions." cstanton@thenational.ae