Chinese defense: Beijing increases oil imports from Iran and Venezuela

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UNITED STATES (VOP TODAY NEWS) — Between January and March 2019, cargo shipments to China increased 78% from Iran and 192% from Venezuela. Beijing is the largest creditor in Caracas and also actively invests in Tehran projects.

Now, according to experts, China is trying to help its energy partners targeted by US economic sanctions. According to observers, China also acts to protect against pressure from the Americans, writes the site of the channel RT .

China has increased oil purchases to Iran and Venezuela since the beginning of the year. Between January and March, oil deliveries by sea from the Islamic Republic increased by 78% (from 431,100 to 767,200 barrels per day), and 192% (from 84,200 to 246,800 barrels) from the Latin American country. American, according to the information website Tanker Trackers.

RT analysts explain that China’s active purchases of Iranian and Venezuelan oil are due to Beijing’s willingness to support its energy partners, which are under pressure from the United States. In late January, Washington enacted restrictions against Venezuela’s largest oil company, Petróleos de Venezuela, SA (PDVSA).

The US has blocked a total of $ 7 billion in assets of the company. By 2019, the shortfall of PDVSA due to sanctions is expected to be close to $ 11 billion, said US National Security Councilor John Bolton’s advisor.

According to the Energy Information Administration (EIA), mid-March Washington had already completely suspended its oil purchases in Caracas. Under these conditions, according to OPEC statistics, the total amount of oil production in Venezuela decreased by 164,000 barrels a day between January and February, reaching 1 million barrels.

However, the authorities of the Latin American state immediately reacted to US actions by increasing hydrocarbon exports to Asia.

According to Tanker Trackers, in February the US share of ocean oil supplies from Venezuela rose from 21% to zero, while China’s share increased from 7% to 39%.

As stated by Alexei Maslov, director of the School of Oriental Studies of the High College of Economics, at present Beijing is the largest creditor of Caracas. In this way, in the context of the political and economic crisis in Venezuela, China is trying to protect its financial investments with large oil purchases.

“China has invested heavily in Venezuela, and now Caracas is trying to repay its debt through oil supplies. In other words, the money invested is amortized today. Knowing that keeping the current Maduro government in power is essential for China so that these deliveries continue, “says the expert.

According to estimates by the Venezuelan company Ecoanalitica, in January the Latin American Republic had accumulated a debt of $ 21 billion against China, writes on Twitter the director of the company, Asdrubal Oliveros.

For her part, Natalia Molchanova, deputy director of the Alpari Analytical Center, noted that the total amount of Chinese investment in Venezuela was between 50 and 70 billion dollars, according to estimates.

The expert believes that Beijing is also concerned about the protection of its national interests in Iran. On May 8, 2018 the United States withdrew from the nuclear agreement with the Islamic Republic and announced the reinstatement of sanctions against the latter.

The main restrictions came into force on November 5 and apply to the energy sector and operations with the Iranian Central Bank.

According to the US State Department, the main purpose of these sanctions is to defeat the income that Iran derives from oil sales. In addition, the White House granted a 180-day reprieve to some major importers of Iranian hydrocarbons. Thus, China, Japan, South Korea, India, Greece, Italy, Turkey and Taiwan can freely buy Iranian hydrocarbons until May 5, 2019.

During these six months, according to the Americans’ idea, Iran’s partners will have to restructure their imports until they completely renounce cooperation with Tehran. 23 states have already completely stopped Iranian oil purchases, said April 2 the US Special Representative for Iran Brian Hook.

Nevertheless, according to a study by Tanker Trackers, between January and March China’s share of oil shipments by cargo from Iran increased from 29.3% to 42.6%.
“Iran’s debt to China is not as high as Venezuela’s, but Tehran remains one of China’s major oil suppliers.

In addition, Chinese companies want to work on the Iranian oil fields, knowing that Beijing is investing in some infrastructure projects in the Islamic Republic. As a result, China is effectively trying to provide economic support to its partners to offset US sanctions against these countries,” said Natalya Milchakov.

According to Alexei Maslov, this active energy partnership with Iran and Venezuela is also directly linked to the tension in relations between China and the US.

According to the expert, even if a trade agreement is signed and the end of the tax war between the two countries, Washington will continue to pressure Beijing. This is why China is trying to strengthen cooperation with other partners.

“China imports mainly oil and gas from Russia, the Gulf countries and the USA. But it turns out that the US can block the flow of their hydrocarbons into China, as well as negatively impact oil supplies in the Middle East. On this background, Beijing is looking for alternative sources of supply,” says Alexei Maslov.

Oil on sale

In parallel with the increase in oil imports from Iran and Venezuela, China has had to reduce its purchases of Russian hydrocarbons. According to the Chinese Customs Directorate, in February Russian hydrocarbon supplies fell by almost 17%, to 5.74 million tonnes.

As Freedom Finance analyst Alen Sabitov explained, US sanctions force Iran and Venezuela to sell their oil to China at a preferential rate. According to the expert, at present, Venezuelan oil is sold at a discount of 30%, and its Iranian analogue 10% less than the price of the barrel of Brent.

The analyst’s information is confirmed by Chinese official statistics. Customs reports that in February, China bought oil from Russia and Saudi Arabia on average for $ 443 and $ 452 per ton respectively, and $ 437 and $ 340 per tonne for Iran and Japan. Venezuela.

“China’s shares are also explained by the increase in global demand for heavy oil because of anti-Venezuelan sanctions. The Chinese giant PetroChina is gaining additional revenue from reselling Venezuelan heavy oil to the market because it costs less because of sanctions,” said Alen Sabitov.

Natalya Milchakova believes that in the context of current US restrictions, Beijing will continue to buy additional quantities of oil in Caracas and Tehran. At the same time, according to the analyst, under the current conditions China will not significantly reduce its oil imports from Russia.

“Russia delivers oil to China especially in exchange for yuan, so Russia is also a beneficial supplier that accepts the conditions of the buyer. In addition, the interests of both countries to reduce the influence of the dollar in the world coincide, “concludes the expert.

This article is written and prepared by our foreign editors writing for VOP from different countries around the world – edited and published by VOP staff in our newsroom.

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