(MENAFN- Asia Times)
As the Iran-backed Houthis up their attacks on ships passing through the Bab al-Mandab straits at the tip of the Arabian peninsula, they are causing major disruption to global trade. All eyes are on China, which is portraying itself as the peacemaker of the Middle East. There's an expectation that it will pressure Iran to rein in its proxy in Yemen.
Pundits argue that because China is Iran's largest trading partner, accounting for a third of Iranian trade , and one of the few countries to continue purchasing Iranian oil despite American sanctions, importing 90% of Iranian crude , Beijing must wield considerable influence over Tehran.
Prior to the Red Sea crisis, a third of global maritime trade, and 40% of trade between Europe and Asia passed through the Bab al-Mandab Straits. Although Chinese shipping has been untouched by the crisis, Chinese trade has taken a hit. Business representatives in Shanghai complained that ships carrying goods from Europe are forced to reroute around the Cape of Good Hope, incurring additional cost and time.
Furthermore, due to the difficulty in discerning ship ownership, with most ships registered in the Bahamas, Bermuda, Panama and other places, it is only a matter of time before a Chinese-owned ship or a ship carrying Chinese sailors is hit.
With much to lose and little to gain China has, time and time again, tried to put an end to the crisis. According to Iranian officials, Chinese diplomats warned Iran that“if the Houthis do not show restraint, and Chinese interests are harmed, Sino-Iranian trade will be affected .”
However, Beijing's warnings to Tehran fall on deaf ears, and the Houthis continue to wreak havoc in the Bab al-Mandab Strait.
The difficulty of regulating the“dark fleet” Tehran pays little heed to Beijing's warning because Beijing's warning is toothless.
Much of Iranian oil is sold to private Chinese “teapot” refineries – referred to as such because of their small scale compared with the large refineries owned by state-owned enterprises (SOEs).
Unassuming as they are, teapots handle 90% of Iran's total oil exports. In 2018, after the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) and launched the“maximum pressure campaign” against Iran, Chinese SOEs stopped purchasing Iranian oil out of fear of American extraterritorial jurisdiction. However, teapots are undeterred.
There are several reasons for this:
First, the reimposition of sanctions on Iran coincided with the outbreak of the Sino-American trade war. In the same year, management of Shandong Dongming Petrochemical Group – the province's largest teapot – stated that, as China imposed tariffs on American oil in a show of tit-for-tat, the company was ending purchase of American oil, which would be replaced by Iranian oil instea .
Second,“high risk means high return.” At one time, Iranian oil was $13 cheaper than the market average .
Third, some of the smaller teapots do not do business with any other country beside Iran, and they pay Iran in renminbi instead of US dollars , thereby granting them immunity from American extraterritorial jurisdiction. Chinese SOEs, which do not enjoy this versatility, cannot afford to do business with Iran lest they risk their investments in other parts of the world.
Had state-owned refineries been purchasing Iranian oil, Beijing would have a far easier time ordering them to cease purchase. Teapots working with Iran to smuggle Iranian oil into China make it difficult for Beijing to carry out regulation – not to mention that Beijing is reluctant to exert too much pressure on Tehran, fearing it would damage Sino-Iranian relations.
Iran, pitted against the vastly superior American-Israeli alliance, discovered that fighting asymmetric warfare is the only way it can overcome the difference in weight class. Thus, pressuring Tehran to reign in the“axis of resistance” would effectively disarm Iran. It would cast doubt in Tehran on whether Beijing is really as neutral as it claims.
Iranian oil purchased by teapots is difficult to regulate. An Iranian ship carrying Iranian oil sails into the Persian Gulf or approaches the Strait of Malacca, where it lowers its national flag and switches off its automatic identification system . This allows the Iranian ship to stop broadcasting its location and identity.
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