US sanctions on China firms show Iran is ‘potential flashpoint’: Eurasia

U.S. Secretary of State Mike Pompeo at a briefing on September 10, 2019 at the White House in Washington, DC.MANDEL NGAN | AFP | Getty ImagesThe U.S. has imposed new sanctions on several Chinese entities for “knowingly engaging” in transporting Iranian oil — a violation of Washington’s curbs on the Islamic Republic.The move is part of the United States’ “maximum economic pressure campaign against the Iranian regime and those who enable its destabilizing behavior,” said Secretary of State Mike Pompeo in a press release on Wednesday.”We are imposing sanctions on certain Chinese firms for knowingly engaging in a significant transaction for the transport of oil from Iran, including knowledge of sanctionable conduct, contrary to U.S. sanctions,” he said.”And we are telling China, and all nations: Know that we will sanction every violation,” Pompeo said during a press conference on the sidelines of the United Nations General Assembly in New York, according to Reuters.The latest development comes nearly two weeks after the Sept. 14 drones attacks of oil facilities in major crude exporter Saudi Arabia. World powers including the U.S. and some European countries, as well as Saudi Arabia, have blamed the attack on Iran, but Yemeni Houthi group — supported by Tehran — have claimed responsibility. Tehran has denied involvement.The increased rhetoric between the two countries raised concerns about the risk of war in the Middle East, and sent oil prices surging amid concerns of supply disruptions. In response to the attacks, the Trump administration announced plans to deploy U.S. forces to the region.’Potential flashpoint’The Chinese firms on the U.S. blacklist include two tanker subsidiaries of state-owned shipping giant Cosco Shipping Corporation. The company did not immediately respond to CNBC’s request for comment.The Chinese foreign ministry expressed strong disapproval for the U.S. sanctions, Reuters reported, citing spokesman Geng Shuang at a scheduled press briefing on Thursday. The cooperation between China and Iran was legitimate and legal, Geng said, according to the news agency.The new sanctions show that Iran is still a “potential flashpoint” between the U.S. and China, said analysts at risk consultancy Eurasia Group.”Today’s move is more of a shot across the bow than a major escalation,” the authors of the Eurasia Group said in a note Wednesday. “The move does not hit COSCO directly.”Dan Brouillette, deputy secretary of the U.S. Energy Department, had said earlier in September that Washington was “very concerned” about China buying Iranian oil.The latest American sanctions “indicate that the US is keeping a close eye on Chinese activities, even with Iran hawk John Bolton out of the White House,” Eurasia said.However, the consultancy group warned there are other risks that could lead to further escalation.”Triggers for a major US escalation would include: more overt Chinese support for Iran and/or a deterioration in US-China trade talks such that Trump allows hawks in the administration to pursue more impactful sanctions,” Eurasia Group said.Trump pulls out of nuclear dealThe U.S. unilaterally withdrew from a nuclear deal with Tehran in May last year, and pledged to restore crippling sanctions on the Islamic country aimed at putting pressure on its economy.In his statement on Wednesday, Pompeo said: “This action is aimed to deny the Iranian regime critical income to engage in foreign conflicts, advance its ballistic missile development, and fund terror around the world.””We are committed to fully administering our sanctions; the Iranian regime must cease these destabilizing activities or face greater economic pressure and diplomatic isolation,” he added in the Wednesday press release.The deal between Iran and a handful of world powers, brokered in 2015 during the Obama administration, lifted a bevy of sanctions and embargoes on Iran in exchange for the country significantly shrinking the scope of its nuclear capabilities. Iran also gave international inspectors access to its facilities as part of the deal.Iran has said its nuclear program is for peaceful purposes only, according to Reuters.CNBC’s Kevin Breuninger contributed to this report.

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