The State Department is seriously considering using an Obama-era loophole to allow China to import oil from Iran, violating the Trump administration’s pledge to bring Iranian oil exports to zero.
Only last week, the senior State Department official handling Iran said that the U.S. would “sanction any imports of Iranian crude oil.”
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But according to three U.S. officials, the department’s Iran czar, Brian Hook, and his team of negotiators have discussed granting China a waiver to a 2012 law intended to kneecap the Iranian oil industry. The alternative is allowing China, which recently welcomed a shipment of approximately a million barrels of Iranian oil, openly to defy U.S. sanctions.
The Trump team has kept the details of its deliberations closely held as news reports of the Chinese oil imports have proliferated in recent days — and hawks on Capitol Hill have begun to ask questions. It is the latest in a series of dust-ups between the administration and Congress on an Iran policy that has often appeared inconsistent, careening between threats of military action and offers to talk with Iranian leaders.
The 2012 Iran Freedom and Counterproliferation Act targeted the Iranian shipping, shipbuilding and energy sectors, requiring states or companies that wish to import Iranian oil and conduct business with the U.S. to obtain waivers from the U.S. government. A separate law targeted purchases, rather than imports of that oil.
Officials say the State Department is discussing an arrangement that would allow China to import Iranian oil as payment in kind for sizable investments of the Chinese oil company Sinopec in an Iranian oil field — and administration officials have offered to issue a waiver for the payback oil in official correspondence between the Department of State and Sinpoec, according to a source familiar with the situation.
The workaround would serve dual purposes, allowing cash-strapped Tehran to pay off a debt, and let China continue to import Iranian crude as it continues tense trade negotiations with American officials.
Much of the rhetoric from the State Department has specified that the U.S. is targeting purchases — rather than imports — of Iranian oil, a distinction that will become important under the law if the department decides to give China a pass.
“There are right now no oil waivers in place,” Hook told reporters on Friday. “We will sanction any illicit purchases of Iranian crude oil.”
A State Department spokesman told POLITICO that the department remains “committed to full implementation of our sanctions on purchases of Iranian crude oil.”
The Chinese imports, first reported by the website TankerTrackers.com, which uses satellite technology to track ships, have caught the attention of lawmakers. “The Administration stopped issuing sanctions waivers for Iranian oil exports in May, yet China just received massive oil cargo from Iran,” Sen. Marco Rubio (R-Fla.) tweeted last week. “The tanker Saline, capable of carrying 1 million barrels, docked in Jianzhou bay on June 20.”
The State Department declined to comment on the imports, but said that the department “is in regular contact with Beijing regarding our maximum economic pressure campaign on the Iranian regime.”
The U.S. declined to renew past waivers allowing China to import Iranian oil this past spring, in line with its drive to starve the Iranian government of hard currency.
“We’re going to zero,” Secretary of State Mike Pompeo said when he announced the policy in late April. “We’re going to zero across the board.”
China protested at the time, arguing that the move would drive up oil prices.
“The decision from the U.S. will contribute to volatility in the Middle East and in the international energy market. We urge the United States to take a responsible attitude and play a constructive role, not the opposite,” Geng Shuang, a Chinese Foreign Ministry spokesman, said at an April 23 briefing.
China had been importing around 10 million barrels of oil per day, around 500,000 of it from Iran. Those imports spiked briefly in April in anticipation of U.S. sanctions, before falling in May.
Imports of cheap energy are vital to sustaining China’s economic engine, a crucial source of the ruling Communist Party’s political legitimacy amid volatile trade relations with the Trump administration.
Experts say the State Department may have devised the workaround because it has few options for punishing Beijing for its defiance.
“It is the furthest thing from surprising if the administration tries to come up with a story to tell to paper over the non-compliance,” said Jarrett Blanc, who served as the State Department coordinator for Iran nuclear implementation under President Barack Obama. “There’s not that much they can do about it if China says, ‘Screw you.’”
Others say that issuing a waiver to China could help the administration achieve its stated goal of squeezing the Iranian regime and ultimately forcing its leaders back to the negotiating table.
“If the Trump administration did give permission to allow Iran to repay China in kind for debts owed for past work by Chinese oil companies in Iran, it could actually advance the Trump administration’s policy,” said Elizabeth Rosenberg, a senior fellow at the Center for New American Security. “That is, Iran’s exports would deprive Iran of valuable assets and further impoverish the struggling state.”