How does China support shipping Russian and Iranian oil?

Iran and Russia rely heavily on oil revenues as their primary source of income, which is considered the vital artery of their economies, which is greatly affected by Western sanctions.

Therefore, these two countries are seeking to explore new and innovative ways to obtain funds outside the usual legal frameworks, and one of their favorite destinations in this regard is China.

Despite the sanctions, Russian and Iranian oil is finding its way for sale through shipments to China, which is the world’s largest oil importer.

China benefits from these deals through price discounts, which saves it significant amounts in import costs.

According to a study published by the Atlantic Council, the value of these discounts is at least $10 billion.

The study outlines the complex system of oil trade between Russia, Iran and China, which bypasses traditional Western financial systems and shipping services.

This system relies on the use of the Chinese currency for financial settlements, and shipments are transported by what is known as the “shadow fleet,” a group of carriers that operate outside traditional maritime systems and take measures to hide their routes in order to avoid detection.

Until the supply chain for this oil is complete and it becomes a salable derivative, its sold to “teapots” in China, a term given to small refineries that handle 90% of total Iranian oil exports since state-owned Chinese refineries stopped dealing with Iran on a regular official basis.

Once shipments arrive at China ports, the country of origin is changed to be Malaysian or from the Middle East.

This approach allows Russia and Iran to avoid international sanctions and increase their share in global markets.

With the tightening of Western sanctions, Russia has been forced to direct a larger portion of its oil exports to China and India rather than Europe, making it more dependent on Asian markets and forcing it to do more to evade sanctions.

The United States seeks to put pressure on Russia and Iran by imposing secondary sanctions on companies and institutions that do business with them.

However, the United States faces challenges in enforcing these sanctions due to circumstantial measures taken by Russia and Iran, including the use of Chinese currency to circumvent international financial systems.

Ultimately, Russian and Iranian oil traders depend on China as a primary trading partner, and China in turn relies on these deals to meet its oil needs and obtain price discounts.

The research study reveals the challenges and complexities facing these trade relations, and urges Western authorities to monitor them carefully and take the necessary measures to confront the circumvention and bypass strategies adopted by Russia and Iran.