China National Petroleum Corporation

China protests at US bank sanctions

PUBLISHED : Thursday, 02 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:49pm

Beijing yesterday reacted furiously to new Washington sanctions imposed on a Chinese bank owned and run by China National Petroleum Corporation (CNPC) over transactions with Iran.

The Foreign Ministry said it would lodge an official protest and warned that America's move would damage Sino-US relations. It also urged the White House to revoke the sanction.

'The US sanctions against Chinese financial institutions badly violate rules governing international relations and hurt China's interests,' said Foreign Ministry spokesman Qin Gang.

'China is strongly dissatisfied, it is firmly opposed to it and will raise solemn representations to the US from both Beijing and Washington.'

Qin's comments came after the United States imposed sanctions against Bank of Kunlun and Elaf Islamic Bank in Iraq for their involvement in Iran's energy sector, saying both 'facilitated transactions worth millions of dollars on behalf of Iranian banks'.

Kunlun, a mid-sized lender that CNPC directly controls, is seen by its parent firm as an important financial vehicle in its overseas expansion.

CNPC first acquired a 92 per cent stake in the Xinjiang-based Commercial Bank in 2009 and renamed it Bank of Kunlun a year later.

Wang Guoliang, CNPC's chief financial officer, said in 2010 that CNPC planned to become 'the leading global energy company' by 2020 and that overseas expansion was key to that.

The oil giant also owns various financial businesses including insurance, leasing and trust companies. Kunlun is reported to have 130 billion yuan (HK$159.4 billion) of assets at the end of last year.

It has expanded fast in recent years, opening branches in oil-rich countries such as Kazakhstan.

The US sanctions against the bank were unlikely to have a significant impact on CNPC's oil business, said Lin Boqiang, head of Xiamen University's centre for energy economics research. 'I think it is a political gesture. The US wants to do something, so it targets a large importer of Iranian oil,' Lin said.

The banking dispute came after Washington and Beijing clashed last month over proposed United Nations sanctions against Syria, which were vetoed by China and Russia, provoking criticism by the Obama administration.

While the US exempted China on June 29 from legislation passed this year aimed at sanctioning financial institutions that did business with Iran's energy sector, the US invoked a 2010 law to sanction Kunlun.

The US said on Tuesday that Kunlun had provided 'significant financial services to more than six Iranian banks' that were on America's sanctions list.