• Black Twitter Icon
  • Black Facebook Icon
  • Black Instagram Icon
  • Black LinkedIn Icon

Copyright © 2019 The American Israel Public Affairs Committee

U.S. Sanctions Iranian-Linked Chinese Shipping Entities

Recent events illustrate the significant impact of the United States maximum pressure campaign against the Iranian regime.

The United States imposed sanctions on several Chinese shipping entities and their executives in September for continuing to ship and import Iranian oil, violating U.S. sanctions already in place. Shortly after, China announced it would not proceed with a major natural gas project in Iran.

Targeting Oil Shipments

On Sept. 25, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) sanctioned six Chinese state-owned shipping entities, including several subsidiaries of COSCO Shipping Corp.—one of the world’s largest shipping corporations with a fleet of over 1,000 ships. After continuing to import Iranian oil despite U.S. sanctions, the companies were targeted pursuant to Executive Order 13846 for transporting and importing Iranian crude oil.

Two subsidiaries of the Chinese-owned Bank of Kunlun were also targeted for knowingly evading U.S. sanctions on Iran. Bank of Kunlun, a subsidiary of China National Petroleum Corporation, has long been used by China to evade sanctions placed on Iranian corporations and financial institutions. The bank was sanctioned in 2012 for providing financial services to designated Iranian banks, but those sanctions were lifted as part of the 2015 Iran nuclear deal.

Sanctions Impact

The impact of the sanctions has been felt widely in the international shipping market. Companies around the world have cancelled business with the Chinese firms in order to comply with the U.S. sanctions. Although the parent companies of the sanctioned firms were not targeted by the United States, many companies have chosen to circumvent business with those firms out of an abundance of caution and fear that they may be the subjects of future sanctions.

Additionally, because the sanctions have forced companies to find alternative tankers to transport oil, shipping costs have increased dramatically. In some cases, chartering costs are 61 percent higher than they were before the sanctions were put in place.

In an indication of the weight sanctions have already borne, reports indicate that Chinese government officials, in recent trade talks with the United States, have asked for sanctions to be lifted on its shipping companies.

China Pulling Back from Iran

In recent months, Chinese companies have decreased their business in Iran as U.S. sanctions further drive the Iranian regime into economic isolation.

China’s state-owned oil giant, China National Petroleum Corp., reneged on a $5 billion natural gas project, denying Iran the investments necessary to develop its oil infrastructure.

Chinese imports of Iranian crude oil have also scaled back to just over 200,000 barrels a day—compared to 700,000 barrels before sanctions were re-imposed.

Looking Ahead

Should Chinese firms continue to import Iranian oil, the U.S. administration has made clear that it will further ratchet up sanctions.

“Countries are indeed awakening to the truth that the more Iran lashes out, the greater our pressure will and should be,” Secretary of State Mike Pompeo recently said.

Type: Near East Report