January 12, 2012 | Quote

China Gets Cheaper Iran Oil as U.S. Picks Up Tab for Hormuz Strait Patrols

Instead, China’s oil executives are expected to demand lower prices for Iranian crude, said Mark Dubowitz, director of the Iran Energy Project at the Foundation for Defense of Democracies, an advocacy group in Washington.

Dubowitz estimates that if China were the only remaining buyer of Iranian crude, it might command as much as 40 percent discounts. Among the other major refiners of Iranian oil, India has increased orders from Saudi Arabia, and Japanese and South Korean officials say they are gradually reducing their dependence on Iran, Dubowitz said. …

Discussion of the EU embargo “is already setting off a cascade of oil-market behavior,” as the Chinese try to exploit Iran’s weakness by demanding price cuts, Dubowitz said.

The Chinese “are forcing the Iranians to offer these price discounts to compensate for added political and legal risk,” said Dubowitz, who has been advising Congress and the Obama administration.

Sanctions work in part by leveraging the greed of buyers willing to flout sanctions, he said. Even those buyers will hurt Iran’s bottom line by cutting their oil revenue, Dubowitz said.

Dubowitz agrees with Lam that there’s little evidence that “Beijing and Tehran are breaking up.” Rather, a shrinking circle of refiners will be able to “ruthlessly drive for discounts,” he said.

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Iran Iran Sanctions