Despite a fresh round of summer tariffs on China, optimism took hold with the post-Labor Day announcement that the next round of US-China trade negotiations would take place in Washington, DC in October. However, just days after that good news, a seemingly unrelated event—the end of the Joint Comprehensive Plan of Action (JCPOA), known as the Iran Deal—threatens to derail trade talks before they begin.
Although the US withdrew from the Iran Deal in May 2018, other parties to the deal, including the EU and China, have tried to salvage the agreement via a string of 60-day extension periods. The latest—and Iran alleges the last—of these extensions expired on September 5.
Notably, while the Trump administration insists it withdrew from the deal because it could not prevent Iran from developing nuclear weapons, there is likely more behind that decision. By putting “maximum pressure” on Iran with a series of sanctions, the US also turns up the heat on China, the destination for a third of Iran’s $54 billion in exports, nearly all crude petroleum.
A match made in heaven
Long vital to China’s economy, Iran acts as the trading hub linking east and west along the Silk Road. Today, a freight train connects the two countries directly, cutting shipments’ time to roughly two weeks, compared with up to 50 days by sea.
When the US first sanctioned Iran in November, Chinese traders were dealt a devil’s bargain—either pay higher prices on the open market or face the wrath of the US by continuing to import from Iran. Although recent customs data shows Chinese imports of Iranian crude at their lowest levels since mid-2010, they still amount to about 209,000 barrels per day, roughly 6.3 million barrels per month.
Raising questions about potential smuggling, tankers linked to a subsidiary of China National Petroleum Corporation have drawn scrutiny from US officials recently. Seen via satellite imagery interacting with Iranian tankers, the Chinese tankers also engaged in other potentially deceptive behavior, such as turning off tracking devices and altering vessel names to avoid common maritime tracking practices.