The US sanctioned six Chinese entities and their top executives Wednesday for trading oil with Iran, as officials of the Trump administration continue to push world leaders to increase pressure on Tehran.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
In a speech at a United Against Nuclear Iran event, the US Secretary of State Mike Pompeo said these companies "knowingly transported oil from Iran contrary to United States sanctions. We're telling China and all nations: know that we will sanction every violation of sanctionable activity."
The US Treasury Department announced Wednesday that two affiliates of Cosco Shipping Co., China Concord Petroleum Co., Kunlun Holding Co., Kunlun Shipping Co. and Pegasus 88 and five executives had been added to the Office of Foreign Assets Control's specially designated nationals and blocked persons list.
In a statement, Treasury said the sanctions on the two Cosco affiliates, Cosco Shipping Tanker (Dalian) Co. and Cosco Shipping Tanker (Dalian) Seaman & Ship Management Co., would not apply to their parent company, Cosco Shipping Co., nor affiliates of Cosco Shipping Holdings.
"US persons, therefore, are not prohibited from dealing with COSCO, its non-blocked subsidiaries, or non-blocked affiliates to the extent the proposed dealings do not involve any blocked person, or any other activities prohibited pursuant to any OFAC sanctions authorities," Treasury said. "Similarly, non-US persons do not face sanctions risk for engaging in transactions with COSCO, its non-blocked subsidiaries, or non-blocked affiliates."
Shipping market participants Wednesday said they were still unsure of the full ramifications of the sanctions announcement, with one major charterer saying they were "trying to digest" the news.
Cosco has 25 VLCCs and a number of Suezmax, Aframax and Panamax tankers, according to the company's website, but there may be more tankers than that, sources said. Since the sanctions only apply to two of the company's affiliates, it remains unclear what impact the sanctions may have.
"It's an interesting outcome, but too early to see the implications," a VLCC owner said.
Since ending sanctions waivers that allowed Iran's top customers to continue purchases of Iranian crude, the US had previously sanctioned only one Chinese company for violating US restrictions on Iran's oil sector: state-owned trading company Zhuhai Zhenrong and executive Youmin Li.
Iranian oil exports, which averaged more than 1.7 million b/d in March, fell below 424,500 b/d in August, according to data from cFlow, Platts trade flow software. Just over 204,200 b/d of Iranian exports in August went to China, according to Platts cFlow.
Analysts have said the Trump administration remains unlikely to sanction a major Chinese entity, even as imports of Iranian crude continue, due to the impact on the global economy if the trade dispute between the two nations drags on.
There was speculation that this week's UN General Assembly meeting could trigger some easing of US sanctions on Iran, potentially following a meeting between the US President Donald Trump and Iranian President Hassan Rouhani. But odds of this went from slim to none after the September 14 attack on Saudi oil facilities, which caused a sudden loss of 5.7 million b/d in supply.
The US immediately blamed Iran for the attack, and, in his speech before the UN Tuesday, Trump signaled his administration's hard line against Iran would only strengthen.
"As long as Iran's menacing behavior continues, sanctions will not be lifted, they will be tightened," Trump said.
On Monday, the leaders of Britain, France and Germany joined the US in blaming Iran for the attack as the US pressured other nations to bolster their own sanctions on Iran.
But the possibility of other nations pushing further sanctions on Iran was unlikely, Joe McMonigle, an analyst with Hedgeye Risk Management, said.
"It's unclear where this is going but I think the Administration clearly thinks there is an opening here to reduce whatever EU lifelines exist or in planning stages for Iran," McMonigle said. "Again, I am skeptical about the chances of success here."
-- Brian Scheid, email@example.com
-- Arthur Richier, firstname.lastname@example.org
-- Edited by Manish Parashar, email@example.com