China, Iran to discuss 22m euro oil and gas debt

Leaders will negotiate a payment plan while the speaker of Iran's parliament is in China on a four day visit

PUBLISHED : Friday, 01 November, 2013, 5:56pm
UPDATED : Friday, 01 November, 2013, 6:25pm

As China’s trade with Iran has risen, so has its debt. China owes 22 billion euros (HK$231 billion) for oil and gas, reports the Tehran Times.

The announcement, made by Iran’s vice-president for planning and strategic supervision Mohammad Baqer Nobakht, coincides with a four-day visit to China by the chairman of Iran’s parliament, Ali Larijani. During the visit, he would discuss a payment plan for the debt, said China’s Global Times.

The debt has arisen due to sanctions restricting banking, says Yin Gang, a researcher from China’s Academy of Social Sciences. In an interview with the Global Times on Thusday, Gang explained that the payments were blocked by US sanctions of the Bank of Kunlun, which is a unit of the state-owned China National Petroleum Corporation.

The sanctions on the Bank of Kunlun were imposed in July, last year, because the bank “provided significant financial services to more than six Iranian banks that were designated by the United States in connection with Iran’s weapons of mass destruction programmes or its support for international terrorism”, said the US Department of the Treasury.

China is currently Iran’s biggest export market and is the fifth biggest supplier of oil to China. Iran’s exports to China increased by nine per cent between August and September this year, according to the latest Opec report

The US has issued waivers on its sanctions that allow countries like China, India and Japan to continue buying oil so long as they can demonstrate significant decline in the amount they import every six months.

China must reduce oil imports from Iran in the final quarter if it wants to continue to receive the waiver.

According to Gang, Iran has raised the debt in an attempt to bring to light the impact of the latest round of US sanctions on the Iranian economy.

In a meeting with China’s president Xi Jinping on Wednesday, Larijani said Iran looked forward to strengthening exchanges and co-operation with China relating to its economy, trade, energy and investment sectors, according to China’s Ministry of Foreign Affairs.