U.S. faces deadline to sanction China over Iran
June 28th, 2012
12:00 AM ET

U.S. faces deadline to sanction China over Iran

By Jamie Crawford

The United States faces a deadline Thursday of deciding whether to issue an exemption to Chinese banks and financial instituions, and other purchasers of Iranian oil, or move to cut them off from the U.S. financial system as punishment for not reducing their purchases of Iranian crude by significant amounts.

Under legislation signed by President Barack Obama on December, the United States will take action against countries that continue buying large volumes of Iranian oil through Iran's Central Bank by cutting off financial institutions engaged in those transactions from the U.S. banking system.

The legislation was signed with the goal of strangling the biggest source of revenue for the Iranian government as a way to get Tehran to halt work on segments of its nuclear program that many Western countries fear is being used to produce a bomb. Iran contends its nuclear program is purely for peaceful purposes.

To date, the United States has issued exemptions to 17 countries and Taiwan for reducing their purchases of Iranian oil and diversifying their supply to other countries. On Sunday, the European Union, one of Iran's biggest trading partners, will go ahead with a complete embargo on all purchases of Iranian crude.

Current estimates show a drop to between 1.2 million and 1.8 million barrels a day of Iranian oil since the sanctions were put into effect. Many U.S. officials say the sanctions have already had a devastating effect on the economy and were a main driver in persuading Iran to return to talks with the five members of the U.N. Security Council and Germany, the so-called P5+1, to reach a settlement to Iran's nuclear program.

"Iran is estimated to have lost approximately $10 billion in oil revenue, the Iranian currency has plummeted, and oil output has fallen to a 20-year low - and that is all before the U.S. and EU sanctions go into effect," Sen. Robert Menendez, D-New Jersey, said earlier this month in a statement. He is one of the authors of the legislation Obama signed.

India, Japan and Turkey, major purchasers of Iranian oil, have already been granted exemptions from U.S. sanctions because of their significant reduction in Iranian oil purchases. Another major importer, South Korea, announced earlier this week that it would completely halt its purchase.

But China, one of the largest purchasers of Iranian oil products, has been conspicuously missing from any U.S. exemptions from sanctions that by law must be made by Thursday. But even if China is not judged as compliant, it will still be some time before any sanctions take effect, according to an administration official. The official would speak only on the condition of anonymity because of the sensitivity of the issue.

Some analysts who follow the sanctions program closely think China will ultimately get an exemption.

Mark Dubowitz, with the Foundation for the Defense of Democracies in Washington, says China's imports of Iranian oil were down 20% to 25% from January to May this year from the previous year. "Technically on the basis of the law, the administration would be justified in granting an exemption," based on their reductions earlier this year, Dubowitz said.

While many analysts have attributed that drop to a contract pricing dispute between China and Iran, there are other reasons the U.S. might want to grant a waiver to China as well.

"I also think [the United States] is going to want to maintain P5+1 unity, and would not want to get into a major diplomatic spat with Beijing by sanctioning Chinese banks," Dubowitz said.

"We have had discussions with China; we continue discussions with China," on their purchases of Iranian oil, a senior administration officials told reporters in a conference call earlier this month after the latest round of sanctions waivers were announced. "It's been a very important partner in the P5+1 process. It's been committed to working with us to help Iran from acquiring a nuclear weapon."

The P5+1 talks seemingly stalled after the last session earlier this month in Moscow when a lack of progress on the issues prevented a follow-up round of political talks to be scheduled. While a meeting between the parties at the technical level is scheduled for next week in Istanbul, some analysts question whether Iran is even a genuine party to the talks despite the bite of sanctions.

"I think the administration is hoping that in the aftermath of the full implementation of the central bank sanctions and the impending implementation of the EU embargo on Iranian crude imports that that the Iranians will feel a greater imperative to give a little bit. I'm not persuaded that's the case," Suzanne Maloney, a senior fellow at the Saban Center for Middle East Policy at the Brookings Institution, told CNN.

For Maloney, Iran's insistence in negotiations that it would like to be rewarded for granting concessions over its nuclear program might serve as a predicate to how future talks and sanctions against the Islamic Republic are approached.

"Ultimately whether the Iranian logic offends us or not, I think that is very much the way they perceive their own security interests and if we want them to move, we have to be able to think more creatively about what it is the international community can do to give them incentives to do that."

With a review for those countries granted waivers under U.S. sanctions mandated every 180 days, analysts such as Dubowitz say the administration should call on countries to reduce their purchases by 30% to 40% before the next review. Current exemptions have been granted for reductions of 11% to 22%.

Congress is also considering additional legislation seeking to add provisions to current sanctions that would eliminate any possible loopholes Iran may use to run around the current set. One proposal on Capitol Hill would call for Iran's central bank to be labeled a proliferation concern and bar every financial transaction with the bank with the exception of humanitarian goods, thereby setting up a de-facto trade embargo of the country.

Another proposal would label Iran's entire energy sector a proliferating concern and thereby close existing loopholes that Iran uses to circumvent current sanctions by setting up alternative payment mechanisms for oil trade.

Regardless of what action may come, the current set of sanctions are dependent on the supplies in world oil markets to stay as loose as possible so U.S. and EU actions are not rolled back because of national security concerns.

"The most important thing is Saudi Arabia," Dubowitz said. "If the Saudis maintain their productions levels - that really is the key swing factor."

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Filed under: China • Iran • Sanctions
soundoff (49 Responses)
  1. louisen.com

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    July 9, 2012 at 10:45 pm | Reply
  2. Everett Wallace

    when we place sanctions on a country that means everyone who is with the united states stop buying what ever that country has to offer with out delay, if not then you are with them, there are NO waivers. completly shut off iran and squeeze saudi arabia to a trickle that's about all they have anyway of the oil.

    July 4, 2012 at 11:13 am | Reply
  3. zap

    The Obama administration has been consistent in alienating its allies and appeasing its adversaries.
    The fruits of this course of action are becoming all too clear.
    1. The administration turned on long time ally Mubarak. As a result Egypt has democratically turned radical muslim, anti-US, and has violated the peace treaty with Israel. At the same time Egypt has moved closer to terror groups like Hamas.
    2. As a direct result of Egypt's Arab "spring", Syria searching for it’s own "spring", deteriorated into a bloody civil war. The administration has foolishly supported one side thus prolonging the bloodshed and advancing an al qaeda type chaos much like in Iraq and Afghanistan.
    3. The administration is allowing Iran’s Nazi ayatollahs to bypass oil sanctions and play for time in a fourth round of "negotiations". The administration message to allies is clear – watch your back. With this message Israel is sure to try to defend itself alone.

    June 29, 2012 at 8:29 am | Reply
  4. compaq715

    China has poisoned our pets, homes children and our economy. Killed 1000's of our troops and been a thorn in our sides for 60 + years and yet we still do business with them . Hail to to the power of money

    June 28, 2012 at 2:05 pm | Reply
    • Phunnie boy

      Like the ignorant Tea Partier that I am compaq715, I must agree with you! This China bashing must never stop, or should it? How would I know?

      June 28, 2012 at 5:36 pm | Reply
  5. rk

    TOUGH TIMES IN INDIA: FOREIGN FIRMS PACKING AND RUNNING FOR EXITS
    “NEW DELHI/MUMBAI: Frustrated by a lack of opportunities in India, Germany's Fraport (FRAG.DE), the world's No. 2 airport operator, is shutting its development office in the country, the latest in a growing list of companies exiting Asia's third-largest economy.
    "When we came to India in 2006, we were actually extremely bullish about the market. We felt India had a lot of potential at that time," Ansgar Sickert, who heads Fraport's India operations, told Reuters in a telephone interview on Friday.
    "We were disappointed when none of these opportunities materialized," said Sickert.
    The list of companies to leave India includes telecoms carriers Etisalat ETEL.AD of Abu Dhabi and Bahrain Telecommunications Co BTEL.BH. Another firm, Norway's state-backed Telenor (TEL.OLhas threatened to pull out…..
    India definitely faces the threat of more foreign companies signaling an exit in the near future, as well as warding off new entrants. …
    According to a Nomura report last month, multinationals pulled $10.7 billion out of the country in 2011, up from $7.2 billion in 2010 and $3.1 billion in 2009.

    June 28, 2012 at 2:02 pm | Reply
  6. Quigley

    The politics of hunger seems to be a staple part of U.S. foreign policy these days and I find that disgusting! If this idiot Obama would only meet Mahmoud Ahmedinejad face to face, things could be sorted out. Unfortunately, this idiotic President will only do what the M.I.C. in Washington tells him to do!

    June 28, 2012 at 11:58 am | Reply
  7. randell

    China wants to stretch its muscles over the US just like what's happening in south east asia.

    June 28, 2012 at 10:36 am | Reply
  8. Dmitri

    No one wants another Cold War, but under no president do I ever want to see the US be afraid of another country. Maybe China is rising to become a superpower, or maybe they already are one, but that doesn't mean we just sit back and let them do whatever they want to do. If they don't want to listen to us, then sanction them.

    June 28, 2012 at 9:53 am | Reply
    • Lucke

      We are already in a cold hot war...

      June 28, 2012 at 10:10 am | Reply
    • Madmax

      Actually I have some other concern. While America has 1.3 trillion trade debt to China, can they punish China at this moment?? I am not going to the debate of whether China is a super power at this moment or USA is having cold war with China or not, but this is simply a practical question. Trade is the life line for both China & USA and they have to build on that. And regarding punishment, I have another concern.... USA has a long standing trade embargo on Cuba, but they survived (very poorly though), so there is a possibility that China might also survive. So my suggestions will be to go in a mainly non confrontational path. Now America is building its economy again and there is a presidential election this year. So taking a strong decision will be a risk to Mr. Obama (the reaction from China and wall street may affect the poll results). As a supporter of USA, I would like USA to have steps that is more intelligent/patient and business friendly. And definitely no more war....!!!! Based on discussions to anybody who is willing.

      June 28, 2012 at 11:10 am | Reply
      • TJ

        This could be the best thing thats happened for the US, Sanction China and cut off financial ties....bring production of goods back to US and lets get back to supporting ourselves instead of relying on any other country like we are now.

        June 28, 2012 at 1:36 pm |
    • Kmac

      Why should another country listen to the US? Because your american right? This is why other countries have such a hatred for the US.

      June 28, 2012 at 12:14 pm | Reply
  9. David

    I bet China is shaking in their boots.

    /end sarcasm

    June 28, 2012 at 9:34 am | Reply
    • yide-angle

      LOL!

      June 28, 2012 at 1:06 pm | Reply
  10. Ferd of Aragon

    ISLAM ACCEPTS SELLING OIL TO THE PAGANS CHINESE. THE CHINESE DON,T KNOW RELIGION THAT IS WHY THEY THINK IRAN IS JUST ANOTHER FRIENDLY COUNTRY. THEY SHOULD LOOK AT XINJIANG!!. FREE PIPO SHOULD NOT REST UNTILL THE BUG OF ISLAM HAS BEEN ERADICATED!!

    June 28, 2012 at 9:08 am | Reply
    • John C.

      You're joking, right? Oh, trust me... they know Muslims Uighurs, and hate them.

      June 28, 2012 at 12:06 pm | Reply
    • Joe

      Fellow brother of this earth,
      What makes them different from you? From birth your conscious beliefs have been sculpted by the societies you have encountered. You negatively judge the other side of the fence simply because you of the side you were born on and the influential beings you've encountered in your life's journey. I challenge you to step outside of your current mindset, disregard all of the rules you have placed on your existence and see the people you hate for who they really are – people. We all have ideals, beliefs, emotions, and consciousness. One small step at a time, can we please move to embrace our differences and appreciate the beauty of life? Can we strive for sustainable happiness for both ourselves and our brothers and sisters in our brief time on this earth?
      Or say fcuk it and continue on your current path, but know that in doing so you will never allow yourself to see the true potential of your life's worth.

      June 28, 2012 at 12:22 pm | Reply
  11. teluka65

    With the money your companies,especially car companies depending for most of their livelihood from China, do you think that America will have the guts embargo China?With the billions you have borrowed from China, can you show the middle finger to it?They have you in a head lock America and you know it.This is no longer a two bit country.This is a dragon that has woken up thanks to your previous leaders like Nixon.

    June 28, 2012 at 9:06 am | Reply
  12. Kanes

    US Beggars can't be choosers!

    June 28, 2012 at 7:54 am | Reply
  13. Zoglet

    Does the USG think it is the master of the world?
    Discuss.

    June 28, 2012 at 6:16 am | Reply
    • Layka

      Agree, the USG is an embarrassment to the world.

      June 28, 2012 at 7:01 am | Reply
      • TJ

        Layka, you cuss the USG but will continue to reap the benefits and suckle from the generous USG teeeeet. Must be a sweet deal sitting in the cheap seats.

        June 28, 2012 at 10:36 am |
  14. warsteiner

    I want the US to stop buying anything or giving any of our work over to them. The work sent needs to be done in America not china or mexico or anywhere else. I dont really care what they do I know they are not dumb enough to arm another country with nukes it would be like handing your enemy a gun and say shoot me. They know that they would have to fight numerous countries if Iran did anything stupid. And China is big and has lots of people but they are mostly unskilled farmers and factory workers not soldiers.

    June 28, 2012 at 6:07 am | Reply
    • SS

      How about India? They desperately need work over there. How else can that poor country ever achieve true justice?

      June 28, 2012 at 7:33 am | Reply
    • Joe Providence

      You must be a millionaire if you can afford to pay $20 for a tube of toothpaste or $30 for a hair brush.

      June 28, 2012 at 7:58 am | Reply
    • yide-angle

      You can start now and set an example for others to follow. Give us a list of things you bought that are not MIC.

      June 28, 2012 at 1:13 pm | Reply
  15. Reprinted with Permission

    Quid pro quo transfer of nuclear technology by USA to third world countries such as India needs to be opposed on moral grounds. Billions of people live in that neighborhood and would be at risk from such catastrophes which I am sure the American people would not like to be a party to. We are all well aware that that region is prone to floods, earthquakes, tsunamis, and of course terrorism placing such nuclear installations at tremendous risks. US Congress is urged to reconsider and cancel all the agreements for the transfer of such technologies due “Force Majeure”.

    June 28, 2012 at 5:18 am | Reply
    • rk

      Agreed

      June 28, 2012 at 2:03 pm | Reply
  16. Hotaru

    Relax, Iran isn't going to get nuclear weapons. Where were the WMDs in Iraq, by the way, have anyone found any?

    June 28, 2012 at 4:23 am | Reply
  17. lEO PEREIRA

    CONFUCIUS SAYS – " HE WHO MAKES ENEMIES WITH MUSLIMS WILL GET TERRORIST ATTACK. HE WHO MAKES FRIENDS WITH MUSLIMS WILL GET CHEAP OIL."

    June 28, 2012 at 4:09 am | Reply
    • Honest

      " HE WHO MAKES ENEMIES WITH THE WORLD'S BIGGEST WORLDPOWER WILL HAVE A HARD TIME TO FIND PEACE AND HARMONY "

      June 28, 2012 at 5:34 am | Reply
      • David

        I guess we shouldn't be making enemies with the next up and coming superpower then, huh?

        June 28, 2012 at 9:33 am |
    • Victior

      @ lEO PEREIRA,

      As a follower of Confucianism, no such Confucius quotes were ever written nor spoken by him!

      June 28, 2012 at 6:14 am | Reply
      • Justin Time

        Duh!

        June 28, 2012 at 6:40 am |
  18. quinterius

    Well, stop trading with China. Congress and Obama are utterly stupid. They think they rule the world. No self-respecting country would pay any attention to such stupidity.

    June 28, 2012 at 2:23 am | Reply
    • SnoShadow

      quinterius, anyone who wants to cut off all trade with its largest foreign creditor, who happens to be its 2nd largest importer, who produces 90% of rare earth in world market (which goes into the computer you were pounding on), who holds a veto in the UN, is

      UTTERLY STUPID

      June 28, 2012 at 3:32 am | Reply
      • Chris

        I'm with SnoShadow on this one, Congress and Obama clearly dont think they rule the world – that is just a easy way out of a real conversation on this issue. This is strategical politics, if you dont understand it – DONT COMMENT!

        June 28, 2012 at 8:37 am |
      • quinterius

        I guess none of you appreciates sarcasm. Do you think I am actually advocating cutting off trade with China? How simple-minded can you be?

        June 28, 2012 at 9:39 am |
      • TJ

        DITTO

        June 28, 2012 at 10:38 am |
    • Ultrablu

      quinterius, its because of utterly stupid people like you who view the world through naive and arrogant lenses who is the source of all trouble. your leader is capable of making intelligent decisions but they have to translate their actions into simple, naive terms to please people like you who vote for them. That's the only reason they also appear "utterly stupid"

      June 28, 2012 at 3:59 am | Reply
      • quinterius

        Read my response above. You are another simpleton. Who is the Congress or Obama to decide with whom China should trade? Talk about audacity and arrogance. Do you also think that I am actually advocating that we stop trading with China? Unbelievable.

        June 28, 2012 at 1:25 pm |
    • jicktick

      quinterius, quote 'Congress and Obama are utterly stupid. They think they rule the world'
      for a second I thought you were referring to Congress and Obama, which made sense too.. lol

      June 28, 2012 at 6:03 am | Reply

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