Iran is facing difficulties with 25 million barrels of crude oil that have been stuck in China for six years. The country now seeks to recover this oil. The oil got stranded at Chinese ports due to sanctions imposed by Donald Trump during his first term. This information has been confirmed by three Iranian sources and one Chinese source familiar with the matter.
According to Reuters, analysts believe that after assuming office on January 20, Trump is likely to tighten sanctions on Iranian oil exports once again. Trump’s goal is to restrict Tehran’s income, a strategy he pursued during his first term.
Recently, China has been purchasing 90% of Iran’s exported oil. However, they are buying it at prices lower than market value, resulting in savings of hundreds of millions of dollars for China’s refineries. China’s position is that it does not recognize unilateral sanctions.
The oil stuck in China’s ports is valued at $17.5 billion based on current market prices. However, selling this oil to China has become a challenge for Iran.
Iran’s Ministry of Oil has not commented on the matter, and China’s Ministry of Foreign Affairs stated that China’s cooperation with Iran is legal, but did not provide further details.
Despite Western sanctions, Iran continues to export its oil. To do this, Iran uses certain oil tankers that conceal their movements. Most of the oil Iran sells to China is sent to Chinese ports disguised as non-Iranian oil on paper.
However, the oil stuck in China was initially documented as Iranian oil. In October 2018, Iran’s National Iranian Oil Company (NIOC) supplied this oil to Chinese ports, under a special exemption granted by Trump. Two sources confirmed this to Reuters.
NIOC had stored the oil at two ports in eastern China: Dalian and Zhoushan. These ports housed leased oil tankers that were hired by NIOC. With these leased tankers, NIOC had the flexibility to sell the oil to China or, if needed, send it to other buyers in the region.
However, in 2019, Trump withdrew the exemption, putting Iran in a difficult position. The oil stored in China was unable to find buyers, and China’s customs did not authorize the clearance of the cargo. As a result, the oil remained stuck in the tankers, according to the sources.
The oil tanks at Dalian are operated by PDA Energy, which has been demanding $450 million in rent since 2018. Meanwhile, the tanks at Zhoushan are managed by CGPC.
Iranian officials and Chinese tank operators have held urgent meetings over rent payments, as Tehran anticipates that Trump, upon taking office, will reinstate stricter sanctions. Iran’s Foreign Minister Mohammad Javad Zarif visited Beijing in December and reportedly made some progress on the issue, according to sources, though no details have been disclosed.
If Iran wishes to sell this oil, it will have to offload it from the tanks and transfer it to ships at sea, and then switch it to another vessel. New documentation will need to be created for the oil, according to an Iranian source. Abbas Araghchi, Iran’s Deputy Foreign Minister, who is familiar with the oil procedures and China’s customs process, shared this information with Reuters.
