China and the US are in an intense standoff over Iranian crude oil, with China indicating they may continue to import those medium and heavy barrels even after a sanctions waiver expires next week and the US threatening potentially severe consequences if they do. “Really, we’re now in a pretty serious poker game,” said Richard Nephew, the principal deputy coordinator for sanctions policy at the US State Department during the Obama administration.
“It’s a game of chicken, where neither side is prepared to fully concede, but each recognizes mutual interest in avoiding a collision,” said Suzanne Maloney, deputy director of the Foreign Policy program at the Brookings Institution. Beijing has called its oil trade with Iran lawful, formally criticizing the Trump administration’s decision to allow waivers, known as significant reduction exceptions, to expire May 2 and indicating that oil flows may continue in spite of sanctions.
The Trump administration has publicly given little indication that it will allow China to import any Iranian crude, without facing full sanctions enforcement. “What we are saying to countries is that they have a choice,” Brian Hook, the US State Department’s special representative for Iran, said in a call with reporters Thursday. “They can either do business with the United States and with the global financial system, or they can import Iranian crude oil — but they can’t do both.”
But analysts said it remains unclear if the US is willing to fully enforce sanctions against potential flows of crude between Iran and China, knowing the impact that sanctions on a major Chinese bank, for example, might have on the global financial system. “If China flagrantly violated the sanctions, the United States will have to respond or risk a substantial loss in credibility,” said Elizabeth Rosenberg, director of the energy program at the Center for a New American Security and a former senior sanctions adviser at the Department of the Treasury.