Iran and China are reportedly in talks to use a barter system to continue oil trade between the two countries, according to Financial Times. This comes after U.S. imposed financial sanctions have prevented China from paying at least $20 billion for its oil imports.
China’s oil imports from Iran increased about 50% to 13.5 million tons in the first half of 2011, compared to the same period a year before, according to Iran Independent News Service.Trade between China and Iran reached $29.3 billion in 2010, and the countries signed infrastructure and trade collaboration agreements this month. So it’s no surprise that the countries are looking at a barter system in which China would sell its goods and services in exchange for Iranian oil.
The U.S. has had sanctions on Iran since 1979, but ratcheted up these measures in 2005 after Iranian president Mahmoud Ahmadinejad assumed office and began aggressively pursuing nuclear technology. The sanctions would make it difficult to carry out any dollar-denominated trades with Iran. With oil usually traded in dollars, countries like India and China have struggled to pay off their oil debt.
Iran has been trying hard to bypass U.S. sanctions and launched its oil own oil bourse on the Kish International Commodity Exchange earlier this month. The exchange would trade oil in Iranian rials and euros but noticeably, not in dollars.
Last week Iran announced that it would cut crude oil supplies to India starting August 1. It has been reported that the announcement was timed to coincide with U.S. Secretary of State Hilary Clinton’s visit to India. But Indian oil companies have said they would look to Kuwait, UAE and Saudi Arabia to meet their requirements. Meanwhile, Iran’s foreign minister is expected to visit India to settle India’s oil payments to Iran.