The seizure of oil tankers in international waters in the Gulf of Oman last week are not a standalone event. China will not accept any interference from the U.S. in any aspect of its expansion across the Middle East.
, China has wide-ranging access to several key elements of Iran’s energy, economic, and military sectors. Aside from first refusal on the exploration and development of all oil and gas fields in Iran, and huge discounts for China on the oil and gas produced from those fields, China also wrote into the Agreement several policies that allowed for much greater cooperation between the two countries’ militaries.
Although no Chinese military personnel were directly involved on the ground in the recent seizures of oil tankers, the marker laid down by China through the IRGCN’s oil tanker seizures is clear enough. It demonstrates that China will not accept any interference from the U.S. in any aspect of its expansion across the Middle East, or in the oil and gas flows to China that accompany it.
Although these latest seizures by Iran are primarily politically-motivated - aimed by China at showing that it will no longer tolerate any U.S. interference in its affairs – they also highlight that China does not see any immediate financial or economic fallout from the potentially higher oil prices that a higher risk premium would result in over time. In the 25-Year Agreement, China is guaranteed oil and gas prices from Iran at least 30 percent lower than the relevant oil pricing benchmarks.
It is interesting to note finally that China appears to have decided that the time is now right to come out of the shadows as far as its imports of crude oil from Iran are concerned. Previously, as also analysed in depth in myon the new global oil market order, China had disguised its huge oil imports from Iran in several ways. One of the most tried-and-trusted methods by which this has been done has been at source, with Iranian oil simply ‘rebranded’ as non- Iraqi oil.
disabling – literally just flicking a switch – on the ‘automatic identification system’ on ships that carry Iranian oil. This can be accompanied by just lying about provenance, destinations or specific cargo types in shipping documentation. Iran’s own former Petroleum Minister, Bijan Zanganeh, publicly highlighted this very practice when he said in 2020: “What we export is not under Iran’s name. The documents are changed over and over, as well as [the] specifications.
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