CHINA’S CONCERNS OVER OIL IMPORTS FROM IRAN
February 24, 2012
China’s state-owned oil company Unipec last week reached an agreement with the National Iranian Oil Co. to renew a crude supply contract that had lapsed at the end of the year. The disputes with the Iranian oil companies were primarily over price and commercial, rather than political, in nature.
Some analysts have pointed out that China could gain some bargaining leverage in its negotiations by acting as the buyer of last resort of oil displaced by Western sanctions over its controversial nuclear program.
China’s imports of Iranian oil had fallen earlier by about half in the two months of price negotiations. It led to some speculation that China might seek to shift its purchases more to more stable Russian and Saudi Arabian suppliers to make up the difference.
Earlier, the European Union had announced it would impose an embargo on Iranian oil starting July 1, while the U.S. has barred financial institutions that do business with the central bank of Iran from the U.S. market. This past Sunday, Iran responded with an announcement to stop selling oil to British and French oil companies, while also threatening to cut off oil supplies to the other European nations.
China had been monitoring the situation closely, as China is the largest user of Iranian oil and buys around 20 percent of its oil exports. China has consistently disapproved of the use of sanctions, claiming they are not “constructive,” and decried any use of military force against Iran, while also encouraging all parties to return to dialogue and talks. When asked about Iran’s ban on oil to British and French companies, Chinese Foreign Ministry spokesman Hong Lei said, “We have consistently upheld dialogue and negotiation as the way to resolve disputes between countries, and do not approve of exerting pressure or using confrontation to resolve issues.”
Iran’s ban on oil has also triggered concerns among the Chinese over the rising price of oil and drawn comparisons of American strategic reserves and China’s more paltry store of reserves. A Xinhua article cited a Chinese analyst’s conclusion that China’s strategic oil reserve is sufficient to last only 30 days, while the U.S. has enough for 150 days. It also mentioned that most developed countries have strategic reserves that last 90 days, which China has made its goal by 2020.
For further information on China’s position on Iran and oil imports, please see the following news sources and commentary:
Reuters – “China rebukes Iran for France, UK oil ban”
Compiled by Katie Xiao.