Oil, gas and Iran economic analyst
The cost of shipping oil from the Middle East to China surged by over a third in the wake of new US sanctions targeting 183 tankers carrying Russian and Iranian oil on Friday, according to a Reuters report.
Freight rates for very large crude carrier (VLCC) tankers capable of carrying 2 million barrels of oil on the route hit $37,800, marking a 39% rise compared to last Friday.
The increase reflects a determination by China, the world's top oil importer, to avoid sanctioned tankers and buy up oil from Arab exporters unburdened by sanctions.
The US Treasury Department on Jan. 10 sanctioned 183 tankers transporting Russian oil to China and India.
At least eight were also involved in carrying sanctioned Iranian oil.
Last year, the US sanctioned 139 tankers carrying Iranian oil and more than 100 tankers were also blacklisted in the previous years. However, nearly 500 tankers in total are involved in smuggling Iranian oil, according to advocacy group United Against Nuclear Iran.
Around half of the "dark fleet" carrying Iranian oil has been added to the US blacklist in recent months, senior analyst at commodity intelligence firm Kpler Homayoun Falakshahi told Iran International, presenting Iran with logistical challenges in transporting oil to its top customer by far, China.
The new sanctions targeting tankers are likely more problematic for Iran than for Russia. Russia is permitted under US and EU sanctions to export oil below the $60 price cap and can even insure these exports through Western companies and use European tankers to deliver oil to China and India.
US sanctions allow no such exception for Iran, which is prohibited from selling oil at any price.
Still, the Shandong Port Group - operator of the largest oil terminals receiving Iranian, Russian and Venezuelan oil - banned the entry of US-sanctioned tankers last week.
Iran's daily oil exports to China have fallen by about half a million barrels over the past three months compared to previous months, reaching 1.3 million barrels, Kpler’s data shows.
Just over a third of around 669 tankers transporting Russian, Venezuelan and Iranian oil are subject to some form of Western sanctions, Lloyd’s List Intelligence reported.
Most of these aging tankers, managed by non-Western companies, operate clandestinely by turning off their automatic identification systems (AIS) to smuggle oil to markets in India and China. Many of these vessels are linked to Iranian oil smuggling operations.
During last year, Shandong ports received 1.74 million barrels per day of oil from Iran, Russia, and Venezuela, accounting for nearly a fifth of China’s total oil imports, according to Kpler.
The total volume of Iranian oil unloaded at all Chinese ports last year was around 1.46 million barrels per day, it added.
Chinese refineries have resorted to more buying from Europe, Africa and Arab states in response to the sanctions, Reuters reported citing oil trade sources.
The price of the OPEC oil basket, which largely reflects oil from Persian Gulf’s Arabic states, has surged by $4 in recent days to about $82, signaling rising demand for their oil in Asian markets.
“I am not okay with a single cent of my taxes being spent on the weak Los Angeles good-for-nothing people before it goes to Gaza,” Tehran representative Mehdi Koochakzadeh said.
His remarks were a rebuke to government spokesperson Fatemeh Mohajerani, who over the weekend offered to send firefighters to help combat blazes which have destroyed hundreds of homes and killed at least two dozen people.
“Humanity cannot remain indifferent to the destruction of homes and natural resources, whether caused by war or the wrath of nature,” she said, drawing a parallel with Gaza which lies decimates as Israel fights Iran-backed armed groups.
Koochakzadeh also took aim at two bills seeking to reduce Iran's bank blacklisting, saying they served Washington's goals.
He slammed slammed the efforts to accede to anti-money laundering conventions under the Financial Action Task Force (FATF) as tantamount to “approving servitude to America.”
The bills aim to ease banking restrictions imposed on Iran due to its placement on the FATF blacklist, which hinders the country's international banking operations.
Earlier this month, Iran's Minister of Economy announced that the Supreme Leader had authorized a review of the two key international conventions.
Abdolnaser Hemmati shared on X that relative moderate president Masoud Pezeshkian informed him of the Ali Khamenei's approval for revisiting the Palermo and Countering the Financing Of Terrorism (CFT) bills.
Koochakzadeh's comments sparked a stir within the parliamentary session, leading Speaker Mohammad Bagher Ghalibaf to intervene after Koochakzadeh’s microphone was cut off.
Ghalibaf reminded the assembly that parliament had already fulfilled its role by referring the bills to the Expediency Discernment Council, a body whose members are appointed by Khamenei to rule on disputes between the parliament and government.
“The council had a one-year period to address this issue, which has now lapsed. The government is pursuing permission for a renewed review,” Ghalibaf said.
The Expediency Discernment Council, became involved after another senior body the Guardian Council rejected the two FATF-related bills in 2017.
The FATF, a global financial watchdog created by the G7, plays a crucial role in shaping international banking policies.
Iran’s continued placement on the FATF blacklist has done serious harm to the country’s banking system, leaving it categorized as high-risk due to deficiencies in addressing money laundering, terrorism and proliferation financing.
For Iran to re-enter the international financial system, it must finalize its legislation on the Palermo and CFT conventions.
Despite efforts to join the FATF, experts such as Mohammad Khazaei, Secretary-General of the Iranian Committee of the International Chamber of Commerce, have said additional reforms will be necessary to attract foreign investment.