2024-03-31 10:08:57
Iran and Russia depend on oil revenues, which are considered the “lifeblood” of two economies subject to Western sanctions, which prompts these two countries to search for illegal ways to obtain money, with China being the preferred destination.
Despite the sanctions, Russian and Iranian oil finds its way for sale via shipments to China, which is considered the largest importer of oil in the world, as Beijing benefits from price discounts, which enabled it to save at least about $10 billion by purchasing oil subject to sanctions, according to a research paper published by him. “Atlantic Council”.
The research paper explains the Russian and Iranian oil trade system with China, which bypasses the Western financial system and shipping services.
In 2022, the Group of Seven countries set the price of Russian oil at $60 per barrel.
The sanctioned oil trading system relies on payment in the Chinese currency, renminbi, through small Chinese banks in exchange for Russian and Iranian crude.
Oil shipments are being transported by what has become called the “shadow fleet,” which is a group of oil tankers that operate outside maritime systems, and follow steps to hide their movements as they move at sea without transmitters or receivers to avoid detection.
Once Russian and Iranian oil shipments arrive at Chinese ports, the country of origin is changed as Malaysian or Middle Eastern oil.
Before its invasion of Ukraine last February, Russia sold most of its oil to Europe, but with Western sanctions, Moscow is forced to sell more of it elsewhere from China and India, forcing it to work harder to avoid sanctions.
Last February, Washington blacklisted 14 Russian oil tankers as part of the United States’ efforts to enforce a ceiling on crude oil prices imposed by the West on Russia against the backdrop of its invasion of Ukraine.
The Treasury Department imposed sanctions on the state-run Russian shipping company Sovcomflot, and indicated that it had given 45 days to unload oil and other cargoes for the 14 tankers before the decision came into effect.
Until the supply chain for this oil is complete and it becomes a salable derivative, it is sold to “teapots” in China, a term given to small refineries that handle 90 percent of total Iranian oil exports since state-owned Chinese refineries stopped dealing with Iran on a regular basis. Official.
These oil refineries pay Iran in Chinese renminbi through small financial institutions subject to US sanctions, such as the Kunlun Bank, and this ultimately allows Beijing to avoid exposing its international banks to the risk of US financial sanctions.
Sources told Reuters that oil trade between China and Iran has stopped with Tehran blocking shipments and demanding higher prices from its largest customer, reducing cheap supplies to the world’s largest importer of crude.
The research paper reveals that once Iran receives its dues in the Chinese currency, it has two options: either buy Chinese goods, or keep the assets in a Chinese bank, indicating that Iran cannot use the Chinese currency outside China as it is not desirable for international trade and this currency is rarely used. In transactions between two countries when China is not one of them.
In 2022, trade data reveal that Iran purchased equipment from China worth more than two billion dollars, and electronics worth one and a half billion dollars. These data do not reflect the value of financial transactions between Tehran and Beijing if they are likely to be denominated in the local Chinese currency.
Trading in Russian oil is considered easier than Iranian crude, as it is allowed to be traded as long as buyers pay less than $60 per barrel, while dealing in Iranian oil is prohibited, which gives Moscow more bargaining power.
Russia also depends on transporting its oil to China on the shadow fleet, and it exports oil to China in exchange for importing equipment and technology. In 2022, Russian oil sales to China amounted to about 88 billion dollars, and Moscow paid approximately 72 billion dollars for Chinese goods.
Trade between China and Russia increased using the national currencies ruble and renminbi.
The research paper indicates that China ultimately deals in a way that does not harm its interests. After last December, three Chinese banks stopped accepting payments from Russian companies subject to sanctions, and Chinese officials claim that they are working to solve the problem with their Russian counterparts.
A report published by Reuters stated that Moscow is suffering from some delays in receiving oil payments, as Russian oil companies face delays of up to several months in receiving payments for crude and fuel in light of increasing caution among banks in China, Turkey and the UAE about secondary US sanctions.
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2024-03-31 10:08:57