Treading the trade war tightrope
One of the key hotspots of the trade dispute is likely to be Iran – a country with very close ties to China and one of the main Chinese suppliers of crude. After the United States unilaterally walked away from the Iran nuclear deal, China remained the only certain meaningful customer of Iran capable of ignoring U.S. sanctions and retaliation measures.
Of late Beijing has been Tehranʹs most important trading partner, accounting for 25.6 percent of imports and 19.7 percent of exports. In addition, China has also made clear that it will not stop buying Iranian oil and break commercial ties with Tehran, especially having cut imports of U.S. crude amid the ongoing trade war with America. On the other hand, however, China has also pledged not to increase its oil purchases from Iran.
Seizing the opportunity
Mohammadbagher Forough, a research associate at the Clingendael Institute and assistant professor of International Relations at Leiden University explained to Qantara.de that the U.S. sanctions against Iran are a perfect economic and energy opportunity for China for three reasons.
Firstly, China can use its relations with Iran as leverage against the United States.
Secondly, with European companies leaving Iran for fear of being sanctioned, Chinese companies that are more protected and cannot be sanctioned by the U.S., are now free to enter the Iranian energy market and stand to benefit greatly from deals originally designed for European companies.
Thirdly, due to the fear of sanctions, many countries will be hesitant to enter into energy deals with Iran. This will give China more bargaining power against Iran when it comes to pricing.
Nevertheless, it remains to be seen to what extent and how successfully China will continue its co-operation with Iran and whether Beijing can withstand the pressure from Washington. Just recently, Chinaʹs top refiner Sinopec halved its oil imports from Iran as of September, seen by some as bowing to pressure from the United States, which is currently seeking to reduce Iranian oil exports down to zero.
Although President Trump has already proven unpredictable and erratic, Andrea Ghiselli, a project manager with ChinaMed consultancy and researcher at the School of International Relations and Public Affairs of Fudan University in Shanghai does not think the U.S. will hit Chinese banks involved in the purchase of Iranian oil. According to him, this would be seen as a direct attack against China and it would be highly destabilising for Sino-U.S. relations.
Moreover, Ghiselli predicts that China may try moving away from trading Iranian oil using U.S. dollars. This would come as no surprise considering the degree of interest in the crude futures contract traded on the Shanghai International Energy Exchange. Although Iranian oil is not deliverable through the Shanghai exchange, it seems likely that there are workarounds.