Chinese Bank 'Kunlun' to 'Suspend' Transactions with Iran Under US Sanctions Pressure

Four informed sources told Reuters that Kunlun Bank, the main channel for money transfers between Iran and China, is set to soon suspend these services under pressure from US sanctions. These sources added that Kunlun Bank has verbally informed its clients that it will stop transferring payments from Iran to China in yuan starting November 1. According to these four informed sources, who requested anonymity due to the sensitivity of the matter, the bank, which is controlled by the financial arm of the China National Petroleum Corporation, has also stopped currency transfers with Iran in euros since late August without making this decision public. Kunlun Bank and a spokesperson for the China National Petroleum Corporation declined to comment on the news. It is still unclear how long the suspension of currency services will last and how Chinese sellers of goods and services to Iran will receive their payments as a result of this decision. Additionally, it is uncertain how this decision will affect payments for oil imported from Iran. China is the largest buyer of Iranian oil, and all payments related to these transactions are conducted through Kunlun Bank. Until September of this year, China was purchasing about $1.5 billion worth of oil from Iran each month. However, according to informed sources in the oil market, Chinese refineries have reduced their imports from Iran since October to comply with US sanctions. The decision by Kunlun Bank is a sign of the pressure from US sanctions against Iran, the second wave of which will be implemented from mid-November, with one of its main goals being to reduce or cut Iran's oil exports. We have been told that Kunlun Bank will stop receiving payments from Iran starting November 1. This means that Iran will have to halt imports from China, said a manager of a Chinese company exporting electronic products to Iran. One of these sources, who acts as an intermediary between Kunlun Bank and Chinese companies, told Reuters: 'One of the Kunlun Bank managers told us that after this date, all payments made from Iran will be canceled and returned.' The goal of US sanctions, which resumed after the US withdrawal from the JCPOA, is to pressure Iran to halt its ballistic missile programs and refrain from intervening in regional crises such as Syria, Iraq, Lebanon, and Yemen. The Chinese government has stated that it opposes any unilateral actions by the US and will protect its trade relations with Iran. Kunlun Bank was established in 2006 as a commercial bank in the city of Karamay, located in the oil-rich Xinjiang province in western China. According to the latest reports regarding the bank's activities, since 2009, the China National Petroleum Corporation has been the largest shareholder of this bank and currently owns 70% of its shares. For several years, the Chinese government has chosen Kunlun Bank as the main channel for money transfers with Iran to protect other banks in the country from Western sanctions against Iran. The US Treasury Department sanctioned Kunlun Bank in 2012 for dealing with Iran and transferring funds to an entity linked to the Islamic Revolutionary Guard Corps. About 30,000 Chinese companies are clients of this bank, most of which are state-owned and oil companies. One of the bank's main services is referred to as 'contact with Iran,' and most of its transactions are conducted in yuan and euros. The US government banned this bank's access to the US financial market in 2012. A manager of a manufacturing company in eastern China that exports electronic products to Iran said: 'We have been told that Kunlun Bank will stop receiving payments from Iran starting November 1. This means that Iran will have to stop imports from China.' According to Chinese government statistics from 2016, the last published figures, the volume of China's exports to Iran was $16.4 billion, and its imports from Iran were $14.8 billion. The volume of trade between China and Iran has decreased by about one-third compared to 2014, when it reached its peak.