China 'selling petrol to Iran'
Sale could undermine US efforts to pressure Tehran to give up its nuclear ambitions.
Last Modified: 23 Sep 2009 12:25 GMT
In August, China exported 140,000 barrels of petrol per day, the highest level this year [EPA]

A newspaper report says Chinese state companies are supplying petrol to Iran, a development that could undermine US-led efforts aimed at curbing Tehran's nuclear ambitions.

The report is based on unnamed oil traders and bankers.

London's Financial Times report on Wednesday said the companies are selling the petrol through intermediaries, and provide up to a third of Tehran's imports.

It said that the sales are legal because the current sanctions do not cover fuel imports.

US officials have suggested imposing international sanctions on the trade to force Iran to stop its nuclear activities.

Chinese surplus

Analysts say although Iran is a major crude producer and exporter, it imports refined products such as petrol because it lacks the refining capacity.

Between 30,000 and 40,000 barrels per day of Chinese petrol makes its way from Asian spot markets to Iran through third parties, the Financial Times report said, quoting Lawrence Eagles, head of commodities research at JP Morgan.

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This accounts about 33 per cent of Iran's import of 120,000 barrels per day, the report said.

The sales would complicate US-led efforts to isolate the Iranian government with tough economic sanctions to pressure Tehran to give up its nuclear programme.

Analysts contacted by the AFP news agency said China is a "logical" source for petrol imports for Iran because of their close ties and that the figures appear to be within range.

Victor Shum, senior principal at Purvin and Gertz energy consultancy in Singapore, said: "It is logical in the sense that Iran has a need and China has surplus supply and Chinese gasoline exports are actually quite

He said one-third of Iran's imports is "well within the capacity of China to supply" given the high volume of its petrol shipments.

In January, Iran and China signed a $1.76bn contract for the initial development of the North Azadegan oil field in western Iran.

The agreement between China National Petroleum Corporation (CNPC) and the National Iranian Oil Company (NIOC) foresees production from the field reaching 75,000 barrels a day in four years' time.

Natural gas deal

In March, Iran's state-owned gas company, Iran LNG, and a Chinese consortium signed a 3.39bn deal to produce liquefied natural gas in the Islamic republic's South Pars field.

"Iran does not have a lot of refineries. They produce crude but they have to import gasoline. Their refinery is not good," Clarence Chu, a trader with Hudson Capital Energy in Singapore, said.

Iran says it will not seek to avoid discussion on its nuclear activities on October 1 [EPA]
Shum said China most likely sells the petrol to Iran through trading subsidiaries of state-owned Chinese firms.

"Some international trading houses also supply the product to Iran, so it's not like just one source," he said.

CNPC had no comment to make on the report.

Western countries accuse Iran of secretly trying to build a nuclear weapon, which Tehran denies.

Envoys from the world's major powers will discuss the situation on Wednesday outside the UN General Assembly in New York.

The envoys from the US, Britain, France, Russia, China and Germany are preparing for an October 1 meeting with Iranian officials in Geneva.

Mahmoud Ahmadinejad, the Iranian president, called on Tuesday for global nuclear disarmament. He said nuclear weapons are the source of threats and instability.

He told the Associated Press news agency that Tehran will not seek to avoid discussion on the nuclear issue. But he said it will only pursue talks through the International Atomic Energy Agency.

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