Trump post could signal shift in posture on Iran-China oil trade

Did Washington just give Beijing a green light to buy Iranian oil?

On Tuesday, US President Trump posted on Truth Social that:

• “China can now continue to purchase Oil from Iran…It was my Great Honor to make this happen”

Record scratch: The Trump Administration spent the last few months slapping sanctions on Chinese buyers of Iranian oil as part of what it calls a "maximum pressure campaign." 

• As a result, skittish Chinese buyers – which by some estimates offtake over 90% of Iran’s oil exports – have reduced purchases.

Hours later, a spokesperson from the White House insisted that Trump’s remarks were not a reversal of US policy, stating that he was merely highlighting "his decisive actions" to keep the Strait of Hormuz open.

But on pain of overreading the tea leaves, we think there is more to Trump’s post.

After Iran threatened to close the Strait of Hormuz – a key shipping chokepoint through which some 20% of the world’s oil and gas flows – US officials publicly called on Beijing to pressure Iran to reverse course.

But, but, but: Beijing's main leverage in persuading Tehran to keep the Strait open is the fact that Chinese firms buy Iranian oil.

• Strict US sanctions – and a subsequent drop in Chinese demand for Iranian oil – weakens Beijing's leverage.

Our take: Trump has likely agreed to back off strict enforcement of sanctions in exchange for keeping the Hormuz Strait open.

• If Washington lifts recent sanctions on the independent Chinese “teapot” refineries that buy Iran’s oil, that will be a clear sign that a deal was struck.