China and the US are expected to sign phase one of their trade deal Wednesday at the White House, with the timing potentially complicated by increased US sanctions pressure on Iran and China's current status as Iran's top crude oil and condensate importer.
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On Friday, US Treasury Secretary Steven Mnuchin downplayed that complication, claiming that China has effectively cut its purchases of Iranian crude to zero.
"The China state companies are not buying oil from Iran," Mnuchin told reporters.
Despite US sanctions, which have intensified following Iran's strike in Iraq Tuesday, China remains the largest buyer of Iranian crude despite US sanctions.
In recent months, a large share of Iranian oil flowing to China has been going via the UAE and Malaysia, both of which are popular hubs for ship-to-ship transfers, according to sources.
In much of 2019, China was also offloading Iranian oil from its bonded storage in Dalian, located in the north of the country, sources added. Though flows to China from Iran have also dramatically decreased over the past year.
Iranian crude and condensate exports to China averaged around 225,000 b/d in the second half of 2019 compared to 400,000 b/d in the first half, according to Platts estimates. In 2018, Iran exported around 650,000 b/d of oil to China, according to S&P Global Platts cFlow data and shipping sources.
Mnuchin added that the US continued to work with China, and other longtime Iranian oil buyers, to end potentially illicit imports of Iran crude.
"We are having conversations with China, as well with any other counterparty, on sanctions evasion," he said.
In an interview with Platts in November, Brian Hook, the US State Department's special representative for Iran, said the US was not considering easing sanctions on Iranian crude exports, either in exchange for a trade concession from China or any other action which falls short of meeting the demands outlined by the Trump administration in May.
"In the case of China, they now understand that we will sanction any sanctionable activity, especially illicit imports of Iranian crude oil," Hook said.
In September, the US Treasury Department sanctioned six Chinese entities and their top executives, including two affiliates of Cosco Shipping, for trading oil with Iran in violation of US sanctions. The US previously sanctioned China's state-owned trading company Zhuhai Zhenrong and its top executive for oil trade with Iran.
President Trump and Liu He, China's vice premier, are expected to sign phase one of the US-China trade deal Wednesday at the White House.
"Phase one is very significant," Mnuchin said Friday. "It includes very significant components of changes to technology issues, intellectual property issues, and $50 billion of purchases for our farmers."