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US, Chinese officials in talks on halting imports of Iranian crude

Highlights

China continues to import over 200,000 b/d of Iranian crude

Mnuchin warns China could face new sanctions

Washington — US officials are working behind the scenes to get Chinese independent refiners to stop importing roughly 200,000 b/d of crude oil and condensate from Iran, in violation of US sanctions, according to analysts and Trump administration officials.

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"Just because we haven't seen sanctions rain down on shippers and importers and the independent refiners moving that last 200,000 b/d yet, doesn't mean it's not coming," said Elizabeth Rosenberg, director of the energy program at the Center for a New American Security and a former senior sanctions adviser at the US Department of the Treasury. "I fully expect sanctions on the last remaining Iran oil imports in China to be coming, but it could be a matter of time."

In an interview Sunday with Fox Business, Secretary of the Treasury Steven Mnuchin said US oil sanctions on Iran, fully imposed in May, have eliminated over 95% of Iran's oil revenues. Still, roughly 70% of the remaining Iranian oil exports are being sent to China, which remains Iran's biggest crude buyer.

Iranian crude and condensate exports to China averaged around 225,000 b/d in the second half of 2019, compared with 400,000 b/d in the first half of 2019, according to S&P Global Platts estimates. In 2018, Iran exported around 650,000 b/d of oil to China, according to Platts cFlow data and shipping sources.

Mnuchin said Chinese state-owned companies have ceased buying Iranian oil, suggesting that only independent refiners continue making such purchases. He added that the US was "working closely with [China] to make sure that they cease all additional activities [with Iran]."

Mnuchin said that Treasury and Department of State officials have met with Chinese officials to discuss curtailing imports of Iranian oil.

Rosenberg said that these discussions would likely continue until China stops importing Iranian crude or sanctions are announced.

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"There are different kinds of enforcement activities," Rosenberg said. "In the public, we see them when there's splashy announcements and a press release and a settlement announcement. But behind the scenes there's quite a lot of diplomatic discussions or private talks that go on."

In his interview Sunday, Mnuchin said China "is subject to sanctions like everybody else."

"We will continue to pursue sanctions activities against China and anybody else around the world that continues to do business with them," he said.

Ellen Wald, an energy industry and policy consultant at Transversal Consulting, said she expected China to continue to import Iranian crude as long as its able to.

"Based on Secretary Mnuchin's comments and other comments from US officials, it seems that the US certainly is presenting the image that the maximum pressure policy means exerting maximum pressure on Iran's customers to halt all imports," Wald said.

China's imports of Iranian crude have been highlighted amidst increasing tensions between the US and Iran and a White House ceremony planned for Wednesday when President Trump and Liu He, China's vice premier, are expected to sign phase one of the US-China trade deal.