China Underreports Iranian Crude Buys, Thwarting US Sanctions
Beijing bypasses Western banks and shipping services in the process
By: Tim Daiss
China is buying Iranian crude oil in increasing amounts while hiding the magnitude of the purchases, thwarting US sanctions by developing an oil trade system that bypasses Western banks and shipping services and saving more than US$10 billion in 2023 in the process. Beijing’s imports rose by 11 percent year on year in the first three months of 2024, while substantially underreporting its figures. Beijing reported it imported no crude oil and only US$3 million of derivatives such as mineral fuels, oils, their distillation products, and other bituminous substances, from January through March.
But since its illicit oil trade, also with Venezuela and Russia, can’t be in US dollars, it’s in Chinese yuan. This intersects with Chinese President Xi Jinping’s stated goal of replacing the US dollar as the world’s reserve currency with the yuan or at the very least having several other currencies (including the yuan) as alternatives. Unsurprisingly these crude oil shipments are carried by tankers often known as the “dark fleet” that operate outside of normal maritime regulations and obscure their operations.
Since global oil consumption hovers around 100 million barrels per day and with oil prices in 2023 averaging US$82 per barrel for London-traded Brent crude (the global oil pricing benchmark), the economic and geopolitical impact of trading oil in another currency other than the US dollar is immense…