Iran pushes China to release $1.7 billion worth of stranded Oil

Iran is pressuring China to release 25 million barrels of oil valued at $1.75 billion, which have been stranded in Chinese ports since 2018 due to U.S. sanctions under former President Donald Trump. This development comes as Trump prepares to return to power on January 20, raising concerns that sanctions on Iranian oil exports could be tightened once again.

China, which has consistently opposed unilateral sanctions, purchases about 90% of Iran’s oil exports, often at discounted prices that benefit Chinese refiners. However, the stranded oil underscores the challenges Iran faces in exporting crude even to its largest customer.

The oil, documented as Iranian when it arrived in China in late 2018, was stored in leased tanks at the ports of Dalian and Zhoushan. These tanks provided flexibility for Iran’s national oil company (NIOC) to sell the oil locally or export it elsewhere. However, the situation changed in early 2019 when the U.S. revoked waivers that had permitted the shipments. As a result, the oil remained unsold and stuck in storage.

Now, storage operators in China are demanding significant payments for the prolonged storage. PDA Energy, which operates tanks in Dalian, is reportedly asking Iran to pay over $450 million in fees. In Zhoushan, the storage tanks are managed by CGPC, but the company has not commented on the matter.

Iran’s Foreign Minister Abbas Araghchi recently visited Beijing to address the issue, reportedly making some progress. Still, details remain unclear. Iranian officials are exploring options to retrieve the oil, including ship-to-ship transfers and re-documentation to bypass restrictions.

Despite stringent sanctions, Iran has managed to sustain a global oil trade through a shadow fleet of tankers. However, the case of the stranded oil highlights the risks and costs associated with this approach, especially as geopolitical pressures intensify.

Chinese officials reiterated that their cooperation with Iran remains legitimate but offered no further comments. Meanwhile, the looming threat of tighter U.S. sanctions under Trump has added urgency to Tehran’s efforts to resolve the impasse.

Credit: Reuters