WASHINGTON (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 Chinese 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.”
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 the 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.
Reporting By Andrew Quinn and Timothy Gardner; Editing by Peter Cooney and Sandra Maler