Treasury announces sanctions targeting cheap Iranian oil heading for China

The Treasury Department announced sanctions Wednesday against a number of export companies shipping Iranian petroleum products to China and other east Asian countries, coming to the aid of U.S. allies in the Gulf who are seeing their Asian market share undercut by discounted oil from Russia and Iran.

Russian oil exports to China have spiked following Russia’s invasion of Ukraine, which prompted Western countries to block and scale back their imports of Russian energy products. To stay competitive with cheaper Russian oil, Iran has also slashed its prices on exports to China, undermining the big Gulf producers on the international market.

Ahead of President Biden’s trip to Saudi Arabia this month, the new Treasury sanctions will likely be read as a gesture of good faith on the part of the administration toward regional allies.

Biden has indicated to the Organization of Petroleum Exporting Countries that he thinks they should increase oil production in order to bring down prices.

A barrel of oil now costs around $100, which is well below the $120-price tag following the Russian invasion of Ukraine, but still way above both its low point during the pandemic and its pre-pandemic level.

Treasury’s sanctions target Jam Petrochemical Company, which the department says “has exported hundreds of thousands of metric tons of petrochemical products, worth hundreds of millions of dollars, to companies throughout East Asia.”

Also sanctioned were Edgar Commercial Solutions FZE, Lustro Industry Limited, Oligei International Trading Co. Limited, as well as two United Arab Emirates-based entities — all for their involvement in the purchase and transfer of goods derived from Iranian petroleum.

The Treasury Department said that despite the new sanctions, the Biden administration is still keen to return to the Iran nuclear deal, known as the Joint Comprehensive Plan of Action, which the U.S. pulled out of in 2018.

“While the United States is committed to achieving an agreement with Iran that seeks a mutual return to compliance with the Joint Comprehensive Plan of Action, we will continue to use all our authorities to enforce sanctions on the sale of Iranian petroleum and petrochemicals,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson in a statement.

The statement from Treasury appeared to indicate that the sanctions designation could be amended in the future the department sees a “change in behavior.”

“The power and integrity of OFAC (Office of Foreign Asset Control) sanctions derive not only from its ability to designate and add persons to the list of Special Designated Nationals and Blocked Persons (‘SDN List’), but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior,” the statement said.

Biden has been criticized for his decision to visit Saudi Arabia, which is a longtime U.S. ally, over the killing of Washington Post columnist Jamal Khashoggi.

The journalist was a U.S. resident whose killing had been planned at the highest levels of the Saudi establishment, according to the Central Intelligence Agency.