Building Brics: China's imports of Iranian crude rebounded nearly 50 per cent last month, as Beijing refused to bow to western pressure for sanctions designed to choke off Tehran¿s main source of revenue.
Iranian crude flowing to China
China's imports of Iranian crude rebounded nearly 50 per cent last month, as Beijing refused to bow to western pressure for sanctions designed to choke off Tehran's main source of revenue.
The rise came after differences between the two parties over payments were resolved, and some say it is probable that China has been successful in its attempts to pay a lower price for Iranian oil.
"Its quite likely that the new payment terms are softer than the previous ones," said Bill Farren-Price, the head of the consultancy Petroleum Policy Intelligence.
Iranian exports to China increased by 48 per cent last month to about 390,000 barrels per day (bpd), Chinese customs data shows.
Purchases last month are still down a quarter on the same period a year earlier, but China's rediscovered appetite for Iranian crude stands in contrast to the buying behaviour of other Asian consumers.
South Korea and Japan have both reduced inflows of Iranian oil after the United States imposed sanctions against the Islamic republic and exerted strong diplomatic pressure on its primary customers.
US sanctions target the financing of the crude trade and threaten to deny access to the US financial system by any entity transacting with the Iranian central bank.
In addition, European Union sanctions bar insurers in Europe from issuing coverage for tankers carrying Iranian product, further hampering Tehran's ability to export. As a consequence, Iranian exports are estimated to have declined by 500,000 bpd from 2.2 million bpd last year.
China has countered US entreaties to reduce imports from Iran by saying it complies with existing United Nations sanctions.
Chinese imports had declined at the start of the year, as Sinopec, China's largest refiner, reduced the amount of oil it intends to buy under long-term contracts. A commercial dispute between China International United Petroleum & Chemical Company, known as Unipec, and the National Iranian Oil Company also led to Unipec skipping crude purchases. The dispute was resolved in February, making it possible for additional shipments last month.
Last year, China was the largest buyer of Iranian crude at about 550,000 bpd.
Iran was China's third-biggest source of oil, after Saudi Arabia and Angola.
Observers anticipated a recovery of the Iranian-Chinese crude trade, and regarded Sinopec's scale-down as a move to enhance Beijing's bargaining position, as it seeks discount on its imports.
Chinese demand for energy continues to grow, with total crude imports last month averaging 5.44 million bpd, an increase of more than 3 per cent on April last year.
China compensated for lower imports from Iran by turning to Saudi Arabia, Opec's biggest producer and the only exporter with the capacity to raise its output significantly. It also received additional supplies from the UAE, Angola and Russia.
The conflict between Sudan and neighbouring South Sudan has dried up crude flows from the two countries, depriving China of 260,000 bpd in imports, forcing it to seek alternative sources.
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