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Beijing has shifted its cargoes to ships owned by the formerly state-owned National Iranian Tanker Co (NITC) for nearly all imports to keep supplies flowing. China is Iran’s biggest oil customer and the shift shows the communist nation wants to keep buying Iranian crude oil despite US sanctions against Tehran. Donald Trump re-imposed the sanctions after he withdrew the US from the Iran nuclear deal in May. The US is trying to halt Iranian oil exports to force the country to negotiate a new nuclear agreement and to curb its influence in the Middle East.

China is opposed to any unilateral sanctions and has defended its commercial ties with Iran. But it is not immediately clear how Iran will provide insurance for the Chinese oil purchases, which are worth around £1.17billion ($1.5billion) a month. A source said: “This is not the first time companies exercised the option. “Whenever there is a need the buyers can use that.”

China is Iran’s biggest oil customer

China is opposed to any unilateral sanctions and has defended its commercial ties with Iran

The first round of sanctions went into effect on August 7 and includes rules cutting off Iran and any businesses that trade with the country from the US financial system. A ban on Iranian oil purchases will start in November. Insurers, which are mainly US or European based, have already begun winding down their Iranian business to comply with the sanctions. To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Asia’s biggest refiner Sinopec Group have activated a clause in its long-term supply agreements with NIOC that allows them to use NITC-operated tankers.

Trump's ban on Iranian oil purchases will start in November

This is according to four sources with direct knowledge of the matter speaking on condition of anonymity, as they were not allowed to speak publicly about commercial deals. The price for the oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning that Iran will cover all the costs and risks of delivering the crude as well as handling the insurance, the sources said. One of the sources, a senior Beijing-based oil executive, said: “The shift started very recently, and it was almost a simultaneous call from both sides.” In July, all 17 tankers chartered to carry oil from Iran to China are operated by NITC, according to shipping data on Thomson Reuters Eikon.