China Pulls Out of Giant Iranian Gas Project
October 06 2019 - 1:03PM
Dow Jones News
By Benoit Faucon
China National Petroleum Corp. has pulled out of a $5 billion
natural-gas project in Iran as escalating tensions threaten to
sever Beijing's trade with Tehran, a key lifeline for the Islamic
Republic.
The exit by Beijing -- which had vowed to resist U.S.
restrictions on Iran -- is a blow to Tehran's attempts to fight
growing economic isolation and comes after Washington brought new
sanctions on Chinese companies still trading with Iran.
Iranian oil minister Bijan Zangeneh said Sunday that domestic
company Petropars Co. had fully taken over a development project in
the South Pars gas field after CNPC exited it.
Tehran had hoped the Chinese state-run company would replace
France's Total SA, which left the project last year after the U.S.
reinstated sanctions on Iran.
Iran needs the development to move forward to supply natural gas
for its power stations. But CNPC officials have said the company
struggled to find banking channels to transfer funds to Iran due to
U.S. pressure. CNPC's own bank, Bank of Kunlun, which is the main
conduit for China's Iran trades, has told customers it no longer
accepts trades with the Islamic Republic, though it has said
publicly it intends to keep its business with Tehran.
Other Chinese companies -- in sectors ranging from banking to
autos to tech -- have pulled back from Iran in recent months after
the U.S. moved to squeeze the country's oil exports and designated
its paramilitary force a terrorist organization. Customs data show
China -- which is Iran's last major oil buyer -- imported on
average 233,000 barrels a day from Iran in the May-July period,
one-third of the 700,000 barrels a day it bought before the U.S.
brought back sanctions.
As a result, overall trade between the two nations -- in which
Iran barters oil for Chinese equipment, infrastructure contracts
and consumer goods -- fell under $2 billion in July from $3.5
billion in the same month of 2018, according to Chinese
customs.
Those moves have inflicted more pain on Iran's struggling
economy and left Tehran with less incentive to stay committed to
the multinational nuclear deal that the U.S. pulled out of last
year, Western diplomats have previously said.
China has become warier of Iran amid its trade war with
Washington, and since Saudi Arabia blamed Iran for attacks on its
oil facilities on Sept. 14. The incidents came after months of
escalations in which Tehran was accused by the U.S. of sabotaging
tankers in the Persian Gulf.
In late September, the U.S. Treasury announced new sanctions
against Chinese entities that had maintained trade ties with
Iran.
Two of the companies, Kunlun Shipping Co. and Kunlun Holding
Co., which the U.S. accused of transporting Iranian oil, are linked
to CNPC.
The U.S. also blacklisted Chinese state shipping behemoth Cosco
Shipping Holdings Co., also for carrying Iranian oil, forcing the
company to halt trading of shares in its oil transport unit.
Plans by China Petroleum & Chemical Corp. to further develop
an Iranian oil field could the next casualty of mounting Iran-U.S.
tensions, according to people at the Chinese state-run company.
Back in January, officials at the company, better known as
Sinopec, said it was in discussions to invest $3 billion in the
next development phase of Iran's Yadavaran oil field, which Sinopec
already operates.
Sinopec would been repaid in oil pumped from the field. But the
officials said the negotiations stalled after the U.S. imposed a
total ban on Iran's oil exports.
"No one wants to be in Iran. We are gearing up for a major
conflict," said an adviser to Sinopec in the Islamic Republic. "The
best thing is to bunker down and get out of Iran as much as you
can." Sinopec didn't return a request for comment.
Write to Benoit Faucon at benoit.faucon@wsj.com
(END) Dow Jones Newswires
October 06, 2019 12:48 ET (16:48 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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