In tightening sanctions on Iran, the Trump administration moved on Monday to isolate Tehran economically and undercut its power across the Middle East. But the clampdown has complicated relations with China at a particularly sensitive moment, the New York Times reports.
The decision to stop five of Iran’s biggest customers from buying its oil was an audacious strike at Tehran’s lifeline – one million barrels of oil exports daily, fully half of which go to China. The order was also aimed at India, Japan, South Korea and Turkey, all countries that trade robustly with the United States.
All are also partners with the United States on major security and diplomatic issues that do not involve Iran.
“We will no longer grant exemptions,” Secretary of State Mike Pompeo said in announcing that current sanctions waivers to the five nations would expire on May 2, clearing the way for American economic penalties against all companies or financial institutions that continue to take part in transactions linked to buying Iranian oil.
By withdrawing from the 2015 Iran nuclear deal, and phasing in sanctions, the Trump administration has sought to cripple the Iranian government and weaken the power of its ruling clerics. Pompeo said Iran has earned about $50 billion annually from oil sales, accounting for as much as 40 percent of government revenues, the Times reported.
The Iranian economy is already reeling from sanctions that have also led to a shortage in critical medicine, and Iranian-backed militias have been forced to tighten their payrolls.
By retracting its oil exemptions, the Trump administration is encroaching on China’s energy security even as Washington is trying to strike an all-important trade deal with Beijing. The United States also needs China’s help in controlling North Korea’s nuclear weapons development.
The Chinese government immediately pushed back against the decision on the waivers, although analysts said both Beijing and Washington will be careful not to jeopardize their trade talks.
“China consistently opposes U.S. unilateral sanctions,” said Geng Shuang, a Chinese Foreign Ministry spokesman. “The Chinese government is committed to protecting the legitimate rights and interests of Chinese enterprises.”
Pompeo said the United States has been in “constant discussions with allies and partners” to find an alternative source of oil, including the United Arab Emirates. It is also further embracing Saudi Arabia to punish Iran but avoid damaging the global economy.
Meanwhile, the United States and China have been closing in on an agreement that would cover a wide range of trade issues.
Negotiations are expected to continue over the next two weeks, first in Beijing and then in Washington, to resolve several sticking points, including removing current tariffs. If those gaps are bridged, the two sides will look to schedule a signing meeting between Trump and President Xi Jinping of China in May or June, said a person who has been briefed on the talks and spoke on the condition of anonymity to discuss them.
Any move by Beijing to keep buying Iranian oil – which analysts predicted China almost certainly will find some way to do – would force the United States to decide whether to impose sanctions on Chinese financial institutions, which are increasingly important in the worldwide economy. China could also set up a new vehicle as an alternative to using the current banking mechanisms, as the European nations have done to keep doing some business with Iran.