Russia and Iran’s successful workarounds to Western sanctions on their oil exports depend largely on contributions from China, the economic think tank Atlantic Council wrote in a new report.
As both countries face increasing sanctions from the U.S.-led alliance, Beijing has created an alternative market for their restricted oil. Traded in Chinese renminbi, the market opens the doors to crude-laden “black fleet” tankers that circumvent international maritime rules through covert maneuvers, the Atlantic Council said.
“China’s oil revenues support the Iranian and Russian economies and undermine Western sanctions,” analysts Kimberly Donovan and Maia Nikoladze wrote in a note Thursday.
“Meanwhile, the use of Chinese currency and payment systems in this market restricts Western jurisdictions’ access to financial transaction data and weakens their sanctions enforcement efforts.”
To avoid detection, Iranian fleet tankers often sail stealthily without transponders and pose as Malaysian or Middle Eastern oil once they arrive in China.
Buyers are also nicknamed “teapots,” in reference to small, independent refineries in China. They clandestinely accepted 90% of Iran’s total oil exports, while China’s state-owned refiners shunned Iran for fear of sanctions, the think tank said.
“The teapots are believed to pay Iran in renminbi using smaller U.S.-sanctioned financial institutions, such as the Bank of Kunlun. This strategy allows China to avoid exposing its large international banks to risk U.S. financial sanctions,” the memo said, adding that Iran can either splurge on Chinese products or hide money in a Chinese bank after receiving yuan.
The Atlantic Council also claims that Russia is inspired by the Iranian model. The Kremlin’s “ghost fleet” is sailing toward the world’s second-largest economy while importing technology. Renminbi trading in Moscow also pushed up the ceiling on oil export prices after the G7.
However, analysts have emphasized that China’s aid to Russia is only aimed at safeguarding its own interests, as evidenced by the fact that three out of four Chinese banks suspended payments to sanctioned Russian companies after the introduction of new secondary sanctions by the United States in December 2023.
“While the secondary sanctions do not directly target China’s oil payments, it shows that if the West threatened to sanction major Chinese companies for importing Russian oil above the price ceiling, Beijing would likely comply “added the analysts.
businessinsider
