After nearly a one-month hiatus prompted by US sanctions, China is resuming its banking relations with Iran, President of Iran-China Chamber of Commerce and Industries said.
Asadollah Asgaroladi told the Financial Tribune that the resumption of banking ties would apply to merchants and Iranian expats and students who reside in China but not to tourists and visitors.
The main conduit would be Bank of Kunlun –a bank established in 2006 as a city commercial bank in Karamay. The bank was later chosen by Beijing as its main bank to process oil payments to Iran, shielding other banks from penalties under Western sanctions that ran between 2010 and 2015. The US Treasury sanctioned Kunlun in 2012 for conducting business with Iran.
With the reimposition of the second round of US sanctions earlier this month, Bank of Kunlun also followed suit and stopped its Iran business.
The contracts with Bank of Kunlun are in euro as a way to circumvent the US financial system but could be later be converted to yuan.
Majid Reza Hariri, deputy president of Iran-China Chamber told the Financial Tribune at the time that Bank of Kunlun had notified Chinese exporters to conclude any unfinished business that they have with Iran before Nov. 1 because the bank would no longer "guarantee" such payments could be conducted after the aforementioned date.
According to Hariri, that did not mean that banking relations between Iran and China had ended because China was waiting to see how the special payment mechanism that the EU is supposed to unveil would unfold.
Now, as Asgaroladi revealed it, Bank of Kunlun will be again processing Iran payments as of December 3 after the US granted waivers to China to buy Iranian oil. China is Iran's biggest oil customer and historically its number one trading partner until it was dethroned by neighboring Iraq in late October.
In addition to Bank of Kunlun, a second Chinese bank will also handle Iran payments which will be named later, Asgaroladi said.
According to the official, the contracts with Bank of Kunlun are in euro as a way to circumvent the US financial system but could be later be converted to yuan.
Earlier this month, the United States re-imposed bans on Iranian oil exports after announcing its withdrawal from the Iran nuclear deal in May. The agreement, negotiated in 2015, traded a reduction in international sanctions on Iran for limitations on its nuclear development program. The Trump administration’s renewed embargo targets Iran’s petroleum and shipping industries and places tough restrictions on financial transactions that are critical to the country’s oil and natural gas exports.
Soon after Trump announced the new sanctions regime, his team granted waivers to eight countries—among them the largest importers of Iranian oil— China, India, South Korea, Japan, and Turkey.
"The oil payments are usually transacted 21-30 days after Iran oil is delivered to China as is the custom elsewhere in the world," Asgaroladi said.
China is taking things into its own hands as Europe still struggles to establish a special payment mechanism for Iran in order to keep alive trading with Iran as a way to save the nuclear deal in the wake of the US controversial exit.
Senior diplomats told the Wall Street Journal on Monday that France and Germany will likely host the Special Vehicle Purpose (SPV), as the trade set-up is known.
"China is taking the decision to reestablish banking ties with Iran independently from Europe now that it can import Iranian oil again," Asgaroladi said.
