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.
Shambles, I tell you.