Published on 25 October 2018.
By Mohammad Sadat Khansari
Sources in the know are saying that the main official channel for fund flow between China and Iran – Kunlun bank – will soon stop handling payments from Iran because of the upcoming U.S. sanctions
that are due to take effect at the beginning of next month.
The bank has allegedly informed its clients, verbally, that it will no longer accept yuan-denominated Iranian payments to China from the first of next month.
The financial branch of CNCP, a Chinese state energy giant, controls the Kunlun bank. It is believed that the bank suspended euro-denominated payments from Iran during the summer.
As no official comment has come from the energy company or the bank, the details surrounding the practicalities are not known. For example, for the companies in China that continue to deal with Iran, how will they receive payment for the goods or services that they have provided? This may indicate that Iran will have to stop importing goods from China as payment cannot be facilitated.
And will the payments for China’s imports of Iranian oil be affected by this change? After all, China is one of the biggest importers of oil from Iran. Last month it spent $1.5 billion on Iranian oil, but Chinese state refiners are starting to comply with the U.S. sanctions and have started to scale back on purchases from the Islamic Republic.
The practicalities have yet to be determined but it is likely that any payments from Iran that date from the 1st November onwards will be rejected and returned to the originator’s account.
It is clear that China is feeling the need to adhere to the sanctions that the United States is reapplying to Iran.
Earlier this year, President Donald Trump announced that the crippling economic sanctions that were lifted when the 2015 nuclear deal was agreed would be re-imposed. He is putting economic pressure on Iran so that it can no longer have access to the funds that it uses to finance terrorist and other malign activities across the Middle East and beyond.
It is not known whether the measures to be taken by Kunlun are temporary, and if so, when normal transactional activities can resume.
China has repeatedly defended its commercial ties with Iran after the news about U.S. sanctions being re-imposed was announced and it has expressed opposition to unilateral sanctions.
Beijing selected Kunlun as its bank of choice to process the payments to Iran for its oil. The payments have totalled billions of dollars so far. Back in 2012, the bank was sanctioned by the United States for its business dealings with Iran and for transferring funds to an entity that was linked to the notorious Islamic Revolutionary Guard Corps (IRGC).
The U.S. pressure on Iran is having an effect and the people of Iran are hoping that the Iranian regime collapses soon. The people are exerting as much domestic pressure as they can and they are making it very clear that they will not stop until they achieve regime change.
