Playing US Sanctions: China Walks A Fine Line In Iran

Authored by James Dorsey via MidEast Soccer blog,

Chinese businessman Sheng Kuan Li didn’t worry about sanctions when he decided in 2010 to invest $200 million in a steel mill in Iran that started producing ingots and billet within months of the lifting of punitive measures against the Islamic republic as part of 2015 international nuclear agreement with Iran.

With no operations in the United States, Mr. Li was not concerned about being targeted by the US Treasury.

Mr. Li, moreover, circumvented financial restrictions on Iran by funding his investment through what he called a “private transfer,” a money swap that was based on trust and avoided regular banking channels.

In doing so, Mr. Li was following standard Chinese practice of evading the sanctions regime by using alternative routes or establishing alternative institutions that were in effect immune.

To be able to continue to purchase Iranian oil while sanctions were in place, China, for example, established the Bank of Kunlun to handle Chinese payments.

The Chinese experience in circumventing the earlier sanctions will come in handy with Beijing rejecting US President Donald J. Trump’s renewed effort to isolate Iran and force it to make further concessions on its nuclear and ballistic missiles programs as well as the Islamic republic’s regional role in the Middle East by walking away from the 2015 agreement and reintroducing punitive economic measures.

Chinese foreign ministry spokesman Geng Shuang said in response to Mr. Trump’s announcement that the People’s Republic was committed to the deal and would “maintain communication with all parties and continue to protect and execute the agreement fully.”

China’s likely willingness to circumvent US sanctions is one factor that will influence Iran’s decision on whether it will stick to the agreement. Iran’s decision depends on the readiness and ability of the other signatories - Britain, France, Germany and Russia – to also stand up to the United States.

China’s experience in circumventing sanctions could come in handy as Europe, that like China has rejected Mr. Trump’s move and vowed to ignore the sanctions, weighs ways of putting its money where its mouth is by attempting to shield European companies from potential US punitive action. One possibility would be to use alternative Chinese financial networks.

Nonetheless, this time round, rejecting and violating US sanctions may prove for China as well as the other signatories to be a trickier undertaking. Last time round, China and the other signatories were part of an international consensus that aimed to force Iran to accept restrictions on Iran’s nuclear program even if they at times circumvented the sanctions.

China and other signatories are in the wake of the re-imposition of US sanctions likely to be operating in a far more confrontational environment in which the subtext of Mr. Trump’s decision as well the positions of Saudi Arabia and Israel appears to be a policy that seeks to achieve regime change in Tehran.

Saudi Arabia as well as the United Arab Emirates have suggested in recent months in their 11-month old economic and diplomatic boycott of Qatar that they are willing to quietly sanction those who fail to support them.

There is little reason to doubt that they would do the same in their confrontation with Iran with Saudi Crown Prince Mohammed bin Salman describing the dispute with Qatar as “trivial’ in comparison to the kingdom’s existential battle with Iran.

Saudi Arabia demonstrated its greater assertiveness by forcing major multi-national financial institutions to choose sides in the Gulf spat. In response to Saudi pressure, JP Morgan and HSBC last month walked away from participating in a $12 billion bond sale.

Earlier, Doha Bank, Qatar’s fifth-biggest lender, was forced to reduce the size of a two-year, $575 million bank loan that it had raised in December 2015 to $400 million, when it sought a one-year extension of the facility because Chinese, Hong Kong and Japanese banks opted not to participate.

In the utmost consequence, China’s concerted effort to remain aloof of the Middle East’s multiple conflicts could be severely compromised if it were forced to take sides in a conflict between Iran, a country with which China feels that it has much in common and that it in the past has helped develop its ballistic and nuclear programs, and Saudi Arabia, a more recently found friend that is economically important to the People’s Republic.

To be sure, greater Saudi assertiveness does not mean that the kingdom does not have to tread carefully in potentially seeking to penalize China and others for their potential refusal to go along with Mr. Trump’s confronting of Iran.

Saudi Arabia desperately needs foreign investment to implement Prince Mohammed’s Vision 2030, a far-reaching plan for social and economic reform that aims to diversify the kingdom’s conservative society and oil-dependent economy and turn it into a 21st century, knowledge-based state.

China, moreover, is one of Saudi Arabia’s foremost oil export markets. While the Saudi military remains focussed on US and European arms purchases, China, at a time that a military confrontation with Iran is not beyond the realm of the possible, is a source of weaponry the United States has been so far unwilling to sell to the kingdom.

With the United States refusing to share its most advanced drone technology, China agreed last year to open its first overseas defense production facility in Saudi Arabia. State-owned China Aerospace Science and Technology Corporation (CASC) will manufacture its CH-4 Caihong, or Rainbow drone as well as associated equipment in Saudi Arabia. The CH-4 is comparable to the US armed MQ-9 Reaper drone.

The stakes in the battle to save the Iranian nuclear deal in the wake of Mr. Trump’s decision go however far beyond a belief that the nuclear deal is serving its purpose in curbing potential Iranian nuclear ambitions and economic opportunity.

Leveraging its experience, an effort by China together with Russia and Europe that keeps the Iranian nuclear deal in place and thwarts US sanctions would deliver one of the heaviest body blows to US credibility and perceptions of US power since Mr. Trump came to office in January of last year.

Said a Middle Eastern diplomat:

A successful countering of US sanctions would demonstrate beyond doubt limits to America’s ability to impose its will. That would have wide-reaching consequences, ...

...not in the least question marks in Saudi Arabia and Israel on the degree to which they can risk continuing putting most of their eggs in Washington’s basket.”


Rapunzal Four chan Thu, 05/10/2018 - 22:26 Permalink

Let me get some things straight.


1. All politicians are puppets to the bankers/central bankers. Everyone incl. orange jesus.


2. The cancellation of the deal was already baked in when Obama signed the deal.


3. It’s a god cop bad cop play or kabuki theater. World politics. Good only for control of the masses, incl. periodically wars to depopulate.


4. Yes China will benefit from this move. But the industry of the west already moved to China. Controlled by the big banks. The Gold is almost Completely in China. Billionaires are moving to and inter married Chinese. Watch it plebs, China is the next superpower.


5. Trump was selected to finish off the US. Take the last hope of conservatives and patriots. Very smart move by the banking cabal.


6. Last not least, always remember the rich have no allegiance to any country or religion. 

In reply to by Four chan

Expendable Container TheWholeYearInn Thu, 05/10/2018 - 19:25 Permalink

General Wesley-Clark's words:




The US wars against mideast were planned long before 9/!!

(Wesley Clark - Supreme Allied Commander of NATO, retired 4-star army General)

see HERE

6 million Iranian people, fathers, mothers, children, babies, grandparents - are in mortal danger from evil United Zionist States of America - stop their planned holocaust!

In reply to by TheWholeYearInn

sarz patriotinCalif Fri, 05/11/2018 - 01:12 Permalink

The people of Iran are not muslim, they are Persian with their own religion and culture.

That is about as sensible as saying the same about Greece and Christianity. 

Not only are the Iranis sincere Muslims, they offer their own example as a form of Islamic democracy. And at the core of Khomeini's revolution is the idea of Muslim unity, beyond Shia-Sunni differences. No Shia, said Khomeini, should hesitate to pray behind a Sunni imam.

You can see how dangerous Iran is to the Judaic world order. 

In reply to by patriotinCalif

MK ULTRA Alpha Disgruntled Goat Thu, 05/10/2018 - 21:09 Permalink

A scenario for higher oil prices ramping through out this year, and moving to $200 a barrel in 2019 will be the result of the Iranian debacle.

A naval war will be fought in the Persian Gulf. This will delay oil shipments and cause hysteria in oil markets. The Iranian shipments of oil will be halted.

It could be a false flag, but the naval mindset of both the US and Iran is war. The US 5th Fleet is deployed on the Arab side of the gulf with a US Air Force base in Qatar. The Iranian naval strategy is oriented for battle with the 5th Fleet. Recent engagements proves hostilities are an on going show of posturing, at some point, there will be a shooting war. Oil prices will move higher and higher.

China will be forced to sell off the new massive strategic stockpile to it's domestic market and military use. The US would do the same. While Russia, Saudi Arabia, and OPEC would make trillions. (the entire US strategic petroleum reserve would be sold off at a profit and then abolished, US oil production would grow significantly from the year of higher oil prices, most likely ending US dependence on Middle East oil even though the US imports from Canada and Mexico, less and less oil comes from the Middle East.)

The blocking of Iranian oil shipments would wreck the Iranian economy. It's a great Saudi con to use the US navy to fight the Iranians to clear the gulf of all threats, thereby controlling the flow of oil.

How long would there be a super high price of oil? most likely a few months followed by a ramp down to a supply and demand equilibrium.

In reply to by Disgruntled Goat

sarz TBT or not TBT Fri, 05/11/2018 - 01:33 Permalink

If you can get a visa, do visit Iran. It is full of European and Chinese visitors these days. The hotels are full. Because of sanctions your money will go ridiculously far. You will find a developed, first-world country with fantastic roads and much cleaner than America. The cronyism you hear about is surely exaggerated, or how did this all come about? The people are friendly but much, much politer than Westerners, so you will need to do a bit of adjusting. Walk along the river (now dry because of drought) in Isfahan and maybe you will come away thinking of Paris as the Isfahan of the West. 

In reply to by TBT or not TBT

BarkingCat Thu, 05/10/2018 - 18:45 Permalink

If SE Asia, Russia, EU and South America were to ignore any dictates, including sanctions, then it would be the US who would end up being sanctioned. 

In Stasis Thu, 05/10/2018 - 19:02 Permalink

I'm amazed by just how much Donald Trump and his stooges have utterly eviscerated international diplomacy. His 'Art of the deal' has done more to damage foreign policy than any other president i can think of, and he has appointed the most aggressive, tactless fools to positions of great importance, simply because their arrogance mirrors his own. This is the death of the US empire, and its alliances. Countries have stopped listening, and rightly so. The US has nothing to offer except death and destruction.

As for Iran, all they need to do is nominate Iranian oil to be bought and sold in Yuan, and suddenly the oil backed Yuan trade takes off even more. I know what some of you are thinking. The US will attempt to hold China to ransom if they go this route, by threatening to cut them off from the US dollar, but they can't because they rely so heavily on China for imports. If they cut them from the dollar, it is an economic war with China. We are reaching a tipping point, as we have throughout history, where lines are drawn and alliances form ahead of a long cold war, economic war or just straight up plain war. Countries are already choosing to step away from the US.

IronForge Thu, 05/10/2018 - 19:24 Permalink

PetroYuan/YuanGold, PetroGold, and PetroBarter to the Rescue.

EU, CHN, IND, and others are going buy up all that Petroleum from, and export non Nuke-related goods like food, medicine, and other goods to IRN.

As long as IRN are minding their Own and allied Partner(SYR)'s domestic affairs, I've no problem with them.  If they're sending in Terrorist Squads and Rockets unprovoked into ISR, then it's a problem.


Are there any chances for Non-Aggression Treaties here?

farflungstar Thu, 05/10/2018 - 19:26 Permalink

Transforming Saudi Arabia to a 21st-century, knowledge-based state"

Boy I can't wait, the world's probably holding it's collective breath for this..

I was in a dollar store during Bush2 times (someone said it was a good place to get toiletries cheap) and I found Colgate toothpaste made in Saudi Arabia.

And here I thought all they exported was oil and Wahabbism.

(Didn't buy the toothpaste btw though I'm sure plenty of other poor people did as it was so cheap)






not-me---it-wa… Thu, 05/10/2018 - 22:22 Permalink

article makes little sense.  why would this time be more difficult for china?

these are unilateral us sanctions, not...umm...sanctioned by the un.

china doesn't need saudi oil, they can buy all of iran's output, and increase imports from russia....AND.....they can annex venezuala.

they don't need swift, not with russia's alternate system.

they don't need dollars, with oil priced in yuan.

...........and they can spoil trump's quest for a nobel prize by supporting north korea.

Jung Thu, 05/10/2018 - 22:41 Permalink

violating US sanctions...?

Violating a Mafia extortion scheme by the USA? Who will "sanction" the US? Cooperating with them is a violation!!!

messystateofaffairs Thu, 05/10/2018 - 22:52 Permalink

Morer cheaper oil for China. You go USA, all you doing is killing your own reserve currency (the jewish dying one really) and freeing up global assets for your self declared adversaries. Donny and his fellow monkeys playing with grenades.

uhland62 Fri, 05/11/2018 - 00:55 Permalink

They can possibly pull off that regime change if they use enough violence, death,  and destruction. But this time it won't take 26 years to send them packing again.  

dunce Fri, 05/11/2018 - 10:51 Permalink

If China or anybody else think limiting our economic power is more important than limiting Iran's nuclear power does not understand the problem.