US allows its banks to process dollar dealings with China’s COSCO

The administration of United States President Donald Trump on Wednesday assured US banks that they can temporarily process US dollar transactions on a Dalian unit of China‘s biggest shipping company COSCO that Washington had imposed sanctions on over suspicions it transported oil from Iran.

The US sanctions on September 25 pushed global freight costs to record highs and added millions of dollars in costs to many voyages.

David Peyman, a US State Department official on sanctions, said this month that the ships were the “key artery” for evading US sanctions on Iran’s oil exports and that if the behaviour did not change the administration would look to aggressively and fully enforce US sanctions.

China is the world’s largest importer of Iranian oil despite sanctions that Trump unilaterally reimposed on Tehran last year over its nuclear programme. The US president hopes the sanctions will also limit Tehran’s ballistic missile programme and influence across the Middle East. Tehran says its nuclear programme is for peaceful purposes.

The US Treasury Department’s Office of Foreign Assets Control, or OFAC, said on Wednesday in guidance to sanctions watchers known as “frequently asked questions” it would not expect US financial institutions “to conduct additional due diligence beyond the information collected in the ordinary course of processing such transactions”. The guidance assured banks such deals are permitted through December 20, a wind-down period that Treasury allowed in a temporary waiver issued in October.

Daniel Pilarski, a partner and sanctions expert at the Watson Farley & Williams law firm, said that the point of the guidance was to allow US banks to assume that unless they have knowledge or reason to know that transactions are outside what was allowed in the department’s waiver, they can continue to process dollar payments through December 20.

“It’s not perfect, but it gives a fairly broad latitude to permit almost any US dollar transactions involving COSCO Dalian,” Pilarski said.

It is not known yet whether the Treasury Department will renew the waiver to go beyond December 20.

The department made clear in its guidance on Wednesday that non-US companies and market players are not exposed to so-called “secondary sanctions” over deals with the Dalian unit of COSCO. It had been an open question after the department released guidance in September on whether non-US companies and individuals could be exposed to the sanctions.

China’s imports of oil from Iran in October were stable from the previous month, Chinese customs data showed this week. Imports from Iran remained stable at 532,790 tonnes in October, just below 538,878 tonnes in September, despite persistent tensions between Washington and Tehran.