China has, at least for now, dashed any hopes that it plans to obey tighter U.S. sanctions against Iran after hammering out an agreement to resume some imports of Iranian crude.

 

State-owned Unipec, one of China’s top importers, reached an agreement with National Iranian Oil Co. earlier this week to renew an annual supply contract that had lapsed at the end of the year.

 

During the negotiations, which dragged into February and were only resolved after a visit to Beijing by Iran’s deputy oil minister, imports fell by about 280,000 barrels a day and halved the amount of Iranian crude shipped to China in January and February.

 

Although the timing of the cuts coincided with a renewed push by the international community to apply pressure to Iran over its nuclear activities, the agreement underscores that China’s dispute with Iran was strictly commercial rather political.

 

Beijing is typically pragmatic about its relationships with key oil producers such as Iran, which is China’s third-largest supplier of crude after Saudi Arabia and Angola.

 

Several state-backed oil companies all renewed contracts with NOIC last year, well before U.S. sanctions were tightened, and Unipec was expected to follow suit. But with the U.S. and E.U. moving to target Iran’s financial and oil sectors, Unipec may have found itself in a better bargaining position at a time when it already sought lower prices for crude supply.

 

China has steadfastly defended its economic ties with Iran, and U.S. officials are typically met with a chilly reception whenever they address China’s crude purchases.

 

Earlier this year, the U.S. slapped sanctions on Zhuhai Zhenrong, China’s largest buyer of Iranian crude, accusing the company of selling gasoline to Iran. The move was largely symbolic, considering that Zhuhai has no known assets or business ties to the U.S.

 

Meanwhile, the timing of the agreement also coincides with a visit by Xi Jinping, China’s next leader, to the U.S., where he is hearing concerns over Iran’s nuclear program and is being encouraged to cooperate with international efforts on Iran.

 

The move by Unipec sends a strong message that while China recognizes the need to resolve Iran’s nuclear issue, it isn’t about to cave to Western pressure.

(Source: WSJ)