U.S. slaps sanctions on China state energy trader over Iran

Discussion in 'China' started by JAISWAL, Jan 13, 2012.

  1. JAISWAL

    JAISWAL Senior Member Senior Member

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    U.S. slaps sanctions on China state energy trader over Iran | Reuters
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    (Reuters) - The United States on Thursday imposed sanctions on China's state-run Zhuhai Zhenrong Corp, which it said was Iran's largest supplier of refined petroleum products, as it sought to impress on Beijing and Tehran its resolve to increase economic pressure over Iran's nuclear program.
    Secretary of State Hillary Clinton also imposed
    sanctions on Singapore's Kuo Oil Pte Ltd and FAL
    Oil Company Ltd, an independent energy trader
    based in the United Arab Emirates, the State
    Department said in a notice.
    The State Department said the move was part of
    a broadening international effort to target Iran's
    energy sector and persuade Tehran to rein in its
    nuclear ambitions.
    "The sanctions announced today are an
    important step toward that goal, as they target
    the individual companies that help Iran evade
    these efforts," the statement said.
    The sanction bar all three companies from
    receiving U.S. export licenses, U.S. Export Import
    Bank financing or loans over $10 million from
    U.S. financial institutions, the department said,
    stressing that the sanctions apply only to the
    companies and not to their governments or
    countries.
    The U.S. announced the decision after China's
    rebuff this week of Treasury Secretary Timothy
    Geithner, who traveled to Beijing to press China
    on U.S. demands it do more to help curb Iran's
    oil revenues.
    .
    'SHOT ACROSS THE BOW'
    Analysts said the U.S. move was largely symbolic, given that Zhenrong was unlikely to
    have much U.S. business exposure, but that it did
    send a signal to Beijing and its state-run oil giants such as China National Petroleum Corp (CNPC), China Petroleum and Chemical Corp (Sinopec
    Corp) and China National Offshore Oil Corp..
    These companies have invested billions of dollars
    in the U.S. energy sector, and are much more exposed to the impact of potential sanctions.
    "It's a good shot across the bow and signals the
    U.S. is serious about vigorous sanctions
    enforcement. This could be the beginning of a
    cascade of more sanctions on Chines companies
    if China doesn't curtail its Iranian trade," said Mark Dubowitz, executive director of the Foundation
    for Defense of Democracies, a Washington
    pressure group that favors stronger sanctions on
    Iran.
    Zhuhai Zhenrong - one of four dominant Chinese state oil traders - brokered the delivery of over
    $500 million in gasoline to Iran between July 2010 and January 2011 in contravention of U.S. sanctions law, the State Department said.
    While the U.S. move targeted Zhenrong for its
    gasoline sales, the Chinese company has a
    broader role in Beijing's energy dealings with Iran and has been a major buyer of Iranian oil since at least 1995, typically selling the oil to Sinopec and
    PetroChina, the country's two dominant refiners.
    Zhenrong has been buying about 240,000 barrels per day for several years, representing about 5 percent of China's imports, although sources said last week it would cut crude imports from Iran
    for a second month in February along with other
    Chinese oil traders amid a dispute over
    payments.
    In mid-2010, Zhenrong joined Chinese state
    energy giants in filling a void left by Western oil
    companies and trading houses that had halted
    sales of gasoline to Iran because of toughening
    U.S. sanctions.
    Derek Scissors, an expert in the Chinese economy
    at the Heritage Foundation think tank, said the
    action against Zhenrong would send a message
    to other Chinese state oil majors.
    "We don't want to be taking action against
    Sinopec, CNPC and CNOOC. They are huge, and politically powerful," he said.
    "But Zhenrong is close enough to them, and won't really do that much harm beyond sending the signal."
    .
    TARGETING COMPANIES
    The U.S announcement followed Western moves to tighten the economic noose on Tehran through unilateral sanctions.
    President Barack Obama has signed a U.S. law imposing sanctions on financial institutions that deal with Iran's central bank, its main clearinghouse for oil exports, while the European Union is expected soon to agree to a new ban on Iranian oil imports.
    Washington has sought to impress on friends and foes that it means business, sending U.S. officials around the world to warn of the dangers of dealing with Iran.
    A senior Obama administration official stressed that the purpose of sanctions was to draw Iran back to th negotiating table to discuss curbing its nuclear ambitions, the other half of the 'two-track' U.S. policy of pressure and engagement.
    "The theory of the case here is that these two tracks will ultimately converge and Iran will make a decision that it is important to come to the table to try to remove some of these sanctions, to improve their economy," the official told reporters on condition of anonymity.
    The other two companies listed by the State Department, both well-known names in the Asian oil trading world, are smaller, private trading firms that typically specialize in shipping bunker fuel or heavy residual products but, like Zhenrong, had also begun doing deals to sell gasoline to Iran.
    The State Department said Kuo Oil had provided over $25 million in refined petroleum to Iran between late 2010 and early 2011, while FAL
    provided over $70 million in refined petroleum to
    Iran over multiple shipments in late 2010.
    In all cases, individual deliveries were worth
    significantly more than the $1 million threshold
    under U.S. law and the total value of the
    transactions was well above the $5 million
    threshold for sanctionable activities within a 12-
    month period, the State Department said.
     
    Last edited: Jan 13, 2012
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  3. Ray

    Ray The Chairman Defence Professionals Moderator

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    It indicates that the US is serious about it.

    The Chinese company possibly thought that they could run with the hares and hunt with the hounds and reap a huge profit.

    Just too bad for them that they have been nabbed in the act!!
     
  4. asianobserve

    asianobserve Elite Member Elite Member

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    It seems that the allowance of Chinese firms into US gas and oil resources were baits designed to give the Americans leverage on China. It's interesting how this will turn out as I understand Saudi Arabia is also voicing its displeasure to the Chinese.
     
    Last edited: Jan 13, 2012
  5. Ray

    Ray The Chairman Defence Professionals Moderator

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    Does that mean that China is up a gum tree?
     
  6. charlyondfi

    charlyondfi Regular Member

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    The bidding is getting higher for almost everyone, no doubt, especially for China, as still more than 10 months it need to hold breath, till US election season over...
     
  7. charlyondfi

    charlyondfi Regular Member

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    I am afraid I am behind that Saudi Arabia part, AO. Care to update me with a news link, please?
    -- frankly, ever since Taiwan got a formal diplomatic with Saudi long before (14 years? but no more), it never get along with China unless no choice...
     
  8. no smoking

    no smoking Senior Member Senior Member

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    Take it easy. in contrast, it indicates that US doesn't want to mess it up. If it is really serious, why don't put sanction on Chinese goveronment? You should know this is a 100% state-own company, all its activities must be approved by CCP. In other words, CCP is the one should get blame.

    So US has to more if it really want: for example, put the pressure on CCP.
     
  9. amoy

    amoy Senior Member Senior Member

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    this link may be relevant The Vital Triangle - China, US, Middle East - Alterman & Garver

    excerpts
    Saudi Arabia has been working to develop China's capacity to purchase and use Saudi heavy crude, investing in two refineries along China's coast. These investments include Saudi Aramco's pending purchase of a 25 percent stake in the Qingdao refinery in China's Shandong province, scheduled to refine 200,000 bbl/d by 2008. Aramco will also by in the primary long-term crude provider for the Quanzhou refinery in the Fujian province, scheduled to refine 240,000 bbl/d by early 2009. In addition Saudi Arabia is developing two new refinery projects in Saudi Arabia designed to handle the heavy crude for export, including 400,000 bbl/d facilities in Yanbu' on the Red Sea coast and Jubail on the Gulf coast that will receive crude oil from the Manifa offshore field beginning in 2011. Both sides evince a keen desire to create a steady and reliable commercial relationship based on Saudi Arabia's export of heavy crude.

    In 1988, it was revealed that China sold Saudi Arabia 50 CSS-2 intermediate range ballistic missiles, which are capable of carrying a nuclear payload.
     
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  10. Minh

    Minh Regular Member

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    This is just one of China state run company, it's not gonna hurt China. But China is also heavily dependant on Iran oils as the country is growing at a fast paste. The US is smart just sanction a company that's not heavily invest in the US just to let China knows it can sanction China big oild company that's heavily invest in the US.

    PS: You guys think Iran is next?
     
  11. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    someone will pay somewhere, i cant see the chinese gobble it down all too quietly, would be very unlike them. if the past is anything to go by, there is a definite tit for tat waiting round the corner.

    couldnt help, but laugh. not a chance of that.

    at most this is a symbolic gesture because obama needs to seen as not going soft on china as the rhetoric only soars in the coming days.

    US will mean business if they come hard on india and japan.
     
  12. SADAKHUSH

    SADAKHUSH Senior Member Senior Member

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    The chess game has started with Saudi Arabia calling the shots. Why is Hillary Clinton in a rush to end the trip of Arab countries in Syria? She said it is not working, Would she do it without a back up plan in place? China's PM is shortly due to visit Arab Gulf countries Saudi Arabia, Qatar and UAE, he will be told in no uncertain terms that China has to modify its behaviour when it comes to Iran. Saudi Arabia and her allies in the GCC circle have already made up mind to take out Syria regime and install a Sunni led regime. This will also help weaken Syria's influence in Lebanon. Next in line will be to tackle Iran. If the situation escalates to a point where Iran carries out her threat and blocks the maritime traffic in the Strait of Hormuz this will create opportunity for Western nations and Arab countries to undo the blockage after that how Iran responds will determine the future course of reaction from USA and her allies. In my opinion USA and other Western countries are unlikely going to send their troops in direct conflict against Iran. All the Arab countries will have to do the dirty work of fighting and that is the way it should be. We will perform the aerial sorties and surveillance only.
     
  13. nimo_cn

    nimo_cn Senior Member Senior Member

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    I thought India also dismissed the request by America to decrease oil import from Iran, it is so unfair that US is just pressing China.

    Of course, I am just joking.

    Americans are aware that China won't stop importing oil from Iran because China is just desperately in need of oil. It is not exaggerating to say China may risk a war with US over oil if she has to. Even if CPC doesn't have the hall, millions of Chinese private vehicle onwers are gonna force CPC to fight for oil after they find out their beloved fancy machines are going to be piles of useless steel without oil.

    China won't step back even if US keeps pushing. But US isn't doing that for nothing, Americans could gain some leverage in other issues, say North Korea, by pushing China over Iran. In this regard Americans are very shrewd and pragmatic.
     
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  14. Ray

    Ray The Chairman Defence Professionals Moderator

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    US has the Fleet and the military influence in the Gulf and the ME.

    They will prevail.

    Others might as well get used to the idea!
     
  15. ice berg

    ice berg Senior Member Senior Member

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    Some background of the guy who founded the chinese company. Enjoy!

    Iranian oil, arms, sanctions ... and China's Crazy Yang | Reuters

    Iranian oil, arms, sanctions ... and China's "Crazy Yang"




    By Chen Aizhu
    BEIJING | Fri Jan 13, 2012 5:07am EST
    Jan 13 (Reuters) - A Chinese firm hit by U.S. sanctions as Washington turns the screw on Iran's nuclear program was founded in the mid-1990s by a hard-drinking trader from a military background who regales dinner companions with how he spent much of his youth in a mental hospital.

    Yang Qinglong, who calls himself "Crazy Yang", set up Zhuhai Zhenrong Corp in around 1995 after "high-level military friends" let it be known they wanted someone to formally import crude oil from Iran. At the time, Iran was supplying oil to China to pay for arms supplied by Beijing during the 1980-88 Iran-Iraq war.

    Zhuhai Zhenrong, now headed by Zhang Dongquan, an altogether steadier upstream oil man from China's Yumen oilfield, was the biggest supplier of refined petroleum products back to Iran, according to the U.S. State Department, which has also slapped sanctions on two other energy trading companies.

    The Chinese oil trader - which for years imported Iranian crude to sell to state-run refiners such as China Petroleum and Chemical Corp (Sinopec) and PetroChina - brokered the delivery of more than $500 million in gasoline to Iran between July 2010 and January 2011, contravening U.S. sanctions law, the State Department said.

    Analysts say the U.S. sanctions are largely symbolic given that Zhenrong is unlikely to have much U.S. business exposure.

    AN ACCIDENTAL TRADER

    Yang, now in his 60s and an adviser to Zhenrong, got into the oil business by chance.

    His home province of Yunnan, landlocked in China's southwest and near the Myanmar border, was so short of fuel in the early 1990s that local authorities offered officials cash if they could lay their hands on gasoline or diesel for the province.

    Using his network of contacts, Yang was soon shipping oil from Daqing oilfield, the nation's biggest crude producer, to the little-known Jiujiang refinery, then owned by state-run China Petrochemical Corp, or Sinopec Group, parent Sinopec , in eastern China, and trucking the processed products back to Yunnan.

    "That's how he made his first pot of gold," said a former Zhenrong trader, who asked not be named because of the sensitivity of the subject.

    Former colleagues attribute Yang's success over the years to his eloquence, consummate networking skills and ambition.

    When the military came calling for a conduit to Tehran, Yang, clad in his trademark army-green jacket and with a matching canvas bag slung over his shoulder, beat off rivals to become China's exclusive importer of Iranian oil.

    Yang first visited Tehran in July 1995, and was introduced by China's military to Iran's oil ministry, National Iranian Oil Co (NIOC), the defence ministry and leading Iranian banks.

    Zhenrong - which in mandarin means "boosting military" - was initially attached to the Commission of Science, Technology and Industry for National Defense (COSTIND), which came under the State Council, China's cabinet, and central military committee. One of its tasks was to supervise arms manufacturing and trade.

    In the early days, Yang made his first hires from Sinochem, then China's near monopoly state-run oil trading house, bringing in a crude oil trader and a finance staffer to work at a modest two-storey office in northern Beijing. The rest of the dozen-strong team were mostly fresh out of university and from military families.

    Yang's bedroom was separated from his office in the building by just a toilet.:shocked:

    In 1998, Zhenrong became a commercial state-run enterprise.

    "GLORY YEAR"

    Zhenrong traders fondly recall the company's "glory year" in 2001, when it imported 11 million tonnes of Iranian crude, or 220,000 barrels per day (bpd) - 16 percent of all China's crude imports that year - coinciding with Sinopec increasing its high-sulphur, or sour crude, processing capacity.

    Iran, between 1999 and 2001, shipped more crude oil than Saudi Arabia to China - partly driven by Yang's own efforts - but by 2002 the Saudis claimed the top slot, supplying China with 228,000 bpd versus Tehran's 213,000 bpd, according to Chinese customs data.

    "Yang's extraordinary personal style, sometimes not logical, sometimes even unreasonable, made his counterparts both awe and respect him," said another former trader who saw Yang in action.

    During one meeting with refinery officials, Yang banged his fist on the table and yelled into the face of a plant official: "Why can't you take the (Iranian) crude? Tell me, is your plant owned by the nationalists or the communists?":rofl:

    An official at National Iranian Oil Corp said Yang was a trouble-shooter. "He may get drunk and tell lots of jokes, but he's politically powerful. He solves problems," he said, recalling also how Yang would greet his Iranian peers by lifting them up and carrying them in his arms.

    In quieter moments, colleagues say Yang is something of a bookworm and movie-buff. They say he has read and re-read biographies on Napoleon and Hitler and the 18th century Chinese classic 'A Dream of Red Mansions'. He took staff to the cinema to watch 'Gladiator' and 'Saving Private Ryan'.

    CHANGING TACK

    From around 2006, Zhenrong has faced competition from Unipec, the trading arm of Sinopec, though it has kept its Iranian oil liftings at around 240,000 bpd - about 5 percent of China's current total imports. Unipec last year signed up some 265,000 bpd from Iran, including condensate.

    The rise of Unipec, which last year bought and traded a total of over 3 million bpd of crude oil, sparked talk that Zhenrong could be folded into a larger state-owned firm, simply as a crude oil desk.

    "There was a great deal of uncertainty over Zhenrong's future. At one point, there were rumours that six bigger companies were eager to swallow up Zhenrong," said a company source, who asked not be named due to company policy. "If the company doesn't grow up fast enough, that could become true."

    Under Zhang, however, Zhenrong is now looking to broaden its business beyond petroleum trading, and is scouting for upstream opportunities in Canada and Malaysia. It has a string of strategic alliances with Chinese state banks to secure credit.

    But, with no assets or expertise either upstream or downstream, it could be a tough challenge for a company that, at its core, has 10 people trading Iranian crude and bringing in around 80 million yuan ($12.66 million) a year.

    Zhuhai Zhenrong's refined fuel business, including gasoline sales to Iran, was largely handled by Guangdong Zhenrong Energy Co. Ltd, a wholly-owned unit set up in 2002. By last year, Zhuhai Zhenrong's stake had dropped to around 40 percent, with ownership passing to a group of unknown state-backed companies.

    Headquartered in Guangzhou, in southern China, Guangdong Zhenrong is led by Xiong Shaohui, an ex-official of China's Ministry of Commerce whose job was to manage the country's tightly state-controlled oil import quotas.

    Xiong, 45, hails from the same southwestern resort city of Dali as Yang, and was his protege, sharing a love for Chinese liquor, poetry and martial arts.

    The Guangdong firm was a regular buyer of Iranian fuel oil until 2008, working with Singapore Tianbao Trading, Zhenrong's chartering arm based in the Asian oil hub.

    In mid-2011, Xiong's team joined Chinese state energy giants selling gasoline cargoes to Iran, stepping into a void left by Western fuel suppliers that halted shipments because they were wary of U.S. sanctions.

    Asked about the potential impact from U.S. sanctions, current and former Zhenrong officials appear nonchalant.

    "Sanctioning Zhenrong? How? The company does not have any U.S. assets. On foreign currency payments? They can easily find a solution on that," said the second former Zhenrong trader. (Editing by Ian Geoghegan)

    So much for the sanction!:lol:
     
  16. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    Saudi matters little to either China or US in terms of political influence. This sanctions would only push Chinese firms to be more cautious in the coming future and move towards anti-US countries.
     
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  17. SpArK

    SpArK SORCERER Senior Member

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    How many of them can replace US .?? There would be chaos if the trade is even reduced.
     
  18. SADAKHUSH

    SADAKHUSH Senior Member Senior Member

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    I think you should also pay attention to what has been discussed between USA and SA in particular. Do not underestimate the resolve of these two nations to achieve their geopolitical goals. As per one of the WIKILEAKS item SA officials were recorded stating "Cut the head of Snake". Whether China will back down or not will be decided by your Premier visit of GCC. SA will make an offer that China will be hard pressed to accept it otherwise you will also start facing more social unrest in the muslim majority areas. They gave you a taste of it July 2011 followed with few more. Is that a coincidence or what that the unrest has started around the same time when the noose around Iran's neck being tightened. It is your choice oil from Iran with demonstration by muslim or oil from GCC to fill in the gap created by ban on Iran oil imports. A more sensible will settle for oil and gas from GCC.
     
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  19. Ray

    Ray The Chairman Defence Professionals Moderator

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    Saudi Arabia and most of the oil producing Arab nations wag their tails as per the US dictates.

    Therefore, Iran oil is going to be a big problem for all nations which requires large amount of oil!
     
  20. amoy

    amoy Senior Member Senior Member

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    much more than oil. look at how GCC played in Libya, and now is playing in Syria and Iran, and even Palestine-Israel complex, esp. Saudi as "Custodian of the Two Holy Mosques"
     

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