The mysterious state oil trader hit by US sanctions

The Chinese state-owned oil trading company sanctioned by the White House for violating restrictions on Iranian crude keeps a low profile.

Even so, Zhuhai Zhenrong Co.’s reputation for doing business with Iran is well known. The company was set up in the mid-1990s by a legendary Chinese trader, Yang Qinglong, with support from the Chinese military. The armed forces were still receiving shipments from the Islamic Republic at the time as payment for weapons during the 1980-1988 Iran-Iraq war.

In early-2012, when the Obama administration placed a previous round of sanctions on Iran, Zhenrong was targeted because of its involvement in a gasoline sale to the Persian Gulf nation.

Zhenrong continued to import Iranian crude and fuel oil, despite the sanctions, ignoring efforts by the U.S. to restrict dealings with the OPEC producer and isolate the country over its nuclear ambitions.

Sanctions against Iran were lifted in 2015 when Tehran agreed to a deal over its nuclear program, but were reimposed by the Trump administration last year. In May, the U.S. ended waivers that had allowed some countries, including China, to keep buying some Iranian crude.

All the while, Zhenrong has kept buying. It imported an average of 156,000 barrels a day of Iranian crude in the first five months, compared with around 106,000 in 2018 and 157,000 in 2017, according to estimates by industry consultant SIA Energy.

When announcing the sanctions, the state department said Zhenrong “knowingly engaged in a significant transaction for the purchase or acquisition of crude oil from Iran” after restrictions were fully in place on May 2.

What little else that is known about Beijing-headquartered Zhenrong just adds to the mystery that surrounds it.

Even when it merged with another state-owned company, Nam Kwong Group, in 2015, few details were made public, apart from an official statement on China State Council granting approval to begin a restructuring process. But Nam Kwong – the largest supplier of energy in Macau – said in a statement yesterday that it separated from Zhuhai Zhenrong in September 2018.

Chinese companies have been known to take part in barter trades to settle oil debts with Iran, or make yuan-denominated payments to escrow accounts in Chinese banks, avoiding the use of U.S dollars and limiting the impact of sanctions.

FGE forecast in May this year that China would continue importing around 260,000 barrels a day of Iranian crude and condensate exports in the coming months. More than 70% of that would likely be bought by Zhenrong, the industry consultant said in a note.

Announcing the fresh sanctions yesterday, U.S. Secretary of State Michael Pompeo said they’d also be imposed on the company’s chief executive officer, Li Youmin.

Little is known about Li, too. She joined Zhuhai Zhenrong after graduation, according to her profilepage on the website of an alumni organization of the China Europe International Business School in Shanghai. She declined to comment when reached by Bloomberg yesterday.

The company’s website appears not to work. Nobody answered calls to the main telephone number at Zhenrong’s office in Beijing.

Zhenrong’s revenue was 28.9 billion yuan ($4.2 billion) in 2016, making it China’s 494th biggest company, according to ranking’s compiled by China Enterprise Confederation and China Enterprise Directors Association. The company wasn’t on the list for 2017, which is the latest ranking, meaning it had either dropped out of the top 500 or the information wasn’t available.

Tension between Iran and the U.S. has intensified since the White House backed out of a deal aimed at curbing Tehran’s nuclear program and reimposed sanctions. China, which is increasingly reliant on energy imports, reiterated its criticism of the restrictions, with the Foreign Ministry spokeswoman, Hua Chunying, calling them a violation of international law. Bloomberg