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Iran is accepting renminbi for some of the crude oil it supplies to China, industry executives in Beijing and Kuwait and Dubai-based bankers have said, partly as a consequence of US sanctions aimed at limiting its nuclear programme.|
Tehran is spending the currency, which is not freely convertible, on goods and services imported from China.
Most of the oil that goes from Iran to China is handled by the Unipec trading arm of Sinopec, China’s second-largest oil company, and through another trading company called Zhuhai Zhenrong, according to the oil executives.
The trade is worth as much as $20bn-$30bn annually, according to industry estimates, but a share of this is in barter form. The executives said Zhuhai Zhenrong paid Iran by providing services such as drilling.
“The global financial crisis accelerated the shift from the west to the east,” said the chief executive of one bank in Dubai. “Such measures [as the US sanctions against Iran] will now enhance the acceptability of the renminbi as a transaction currency.”
The US applied sanctions on Zhuhai Zhenrong this year
Sanctions imposed by Washington force financial institutions to choose whether to do business with Iran or with the US, and the US has spearheaded restrictions on Tehran’s central bank. The sanctions and a diplomatic push have led to a reduction in Iranian oil imports by Japan, South Korea, India and China, which together buy more than 60 per cent of Iran’s crude oil exports.
India, which already settles its oil purchases from Iran in rupees, was again urged yesterday by Hillary Clinton, US secretary of state, to reduce its imports.
The renminbi purchases began some months ago. Initially the non-barter portions of the transactions were settled in Beijing through renminbi accounts but, as a result of US pressure, domestic banks such as Bank of China had stopped dealing with Iran, the oil executives and bankers said.
Instead, much of the money is transferred to Tehran through Russian banks, which take large commissions on the transactions, the people said.