U.S. sanctions on Iran and Russia are an advantage to China, energy expert says
Iran and Russia have been slapped with sanctions that have crippled their crude oil export power forcing them to reduce their prices and limiting their export market.
One of the main importers of crude oil globally is China and the Asian country is one of the few markets available to Iran and Russia which have lost their markets in Europe to the United States.
According to energy expert Dean Tavakoli, China is a chief beneficiary of the sanctions on Iran and Russia as they enjoy discounted prices on the crude they purchase from the sanctioned countries.
“U.S. and China I don't see in this sector. They are not competitors because the US is the producer and the Chinese are the buyer… In the past few weeks we have seen U.S. vessels [carrying] natural gases going towards China. U.S. policies are in advantage of the Chinese buyers because of the sanctions.
“You see, the Iranian sanction has been there for the past few years that they have to sell their crude with major significant discounts to China. And now we have added cheaper Russian crude for the Chinese market. When the Chinese purchase at the lower price point, whatever product they are going to make, their major trade partner is America. So all this is going to go back cheaper to America. In an indirect way, Americans are dampening the inflation rate with these sanctions and the relationship and policies that they have on the energy sector,” he told GSW in an interview.
In 2022, U.S. oil companies sold more than 83 million barrels to China. In 2023, the trend went up with oil exports to China through April totaling more than 76 million barrels.
The U.S. Senate in mid-2023 overwhelmingly passed an amendment to an annual defense bill that would ban exports to China of oil from the Strategic Petroleum Reserve.
Dean Tavakoli also explained how Saudi Arabia has replaced sanctioned Iran to become the main exporter of crude oil to China.
“Iran is no longer a key player. It's more like a participant in this market. And, because you need excessive investment in the energy sector to keep up production and when there is no foreign investment or there is no transfer of new technology to any country then their production facility is going to get old and they're not going to be able to keep up. Nowadays, with around 1 million to 1.1 million barrels a day exports from Iran to China, it's more like a noise to Chinese market because the total of the production is less than what is sold to China. That is around 10% of the Chinese need.
“Iran is not going to be able to produce a lot. And now a major relationship is being formed between China and Saudi Arabia. You can see that the Saudis are going to invest heavily in the Chinese energy sector. They are going to build the Petro refinery in [China] so they only need to ship the crude, as they feed to this Petro refinery, and they can sell the final product at the destination of the market,” he said.
Dean Tavakoli is a senior executive who possesses over a decade of extensive global quantitative investment experience. He has recently held multiple roles as the leading management figure of Sea Enerji while also serving as a strategic advisor for the Middle East Oil and Gas. Read his latest publication titled Crude Oil, new landscape.
Watch the interview below
