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China’s oil purchase from Iran leverage in US trade talk

Published: May 16, 2019 19:54:04 | Updated: May 17, 2019 21:09:44


China's purchases of Iranian oil will be leverage against the US in the trade talks between the world's two largest economies, which have stalled, Chinese analysts said on Thursday.

As a commodity, crude oil can be a significant contributor to reduce the US trade deficit with China, which reached 570.2 billion yuan ($84.17 billion) during the first four month of the year.

Exporting crude oil also fits into US President Donald Trump's global energy ambition, according to Global Times.

However, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday that China's purchases of Iranian crude oil will be linked to the trade talks between the US and China.

The trade talks suffered a major setback this week after China unveiled its countermeasures with proposed tariffs on US products worth $60 billion in response to earlier US tariff actions.

"If the talks go well, China could buy less Iranian oil. If not, China could buy more Iranian oil," Lin said.

China is the world's biggest energy user and the Chinese market has been targeted by a number of US energy exporters.

The comments came after the International Energy Agency said on Wednesday that rising US output will offset falling exports from Iran and Venezuela. It also came amid rising tension in the Persian Gulf.

Crude output in Iran dropped 130,000 barrels per day (bpd) to 2.61 million bpd in April, just before the expiration of US sanctions waivers on eight major Iranian oil buyers, according to media reports.

China said it opposes unilateral US sanctions against Iran and will defend the rights of its companies. China increased imports of Iranian crude in April.

Chinese importers have been avoiding purchases from the US because of ongoing trade fight. China's tariffs announced on Monday also targeted US-origin natural gas.

"The vacuum left by Iran and Venezuela can easily be filled by Russia and Saudi Arabia, which now restrict their production under a pact," Lin said.

"China will continue to buy crude from Iran, as this is the legitimate pursuit of a sovereign country, although in the short term buying may be halted for a short period of time," said Li Li, director of research at the Shanghai-based research and consulting firm ICIS China.

"China will not act in response to US threats. In the trade war, Iran is leverage for China," Li told the Global Times.

Experts said that continued low demand from China will hamper US investment in the oil and gas sectors.

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