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Soon after the new law was passed, Japan and ten EU countries reduced trade with Iran. Earlier this month seven others, including India, cut Iranian oil imports. These countries are now exempt from sanctions. As a result Iran's exports have fallen to around 1.5m b/d, according to International Energy Agency (IEA) data.
Other countries have proved harder to influence. China is Iran's biggest oil customer, accounting for 20% of its sales. It stands to lose a lot by reducing trade. So rather than cutting imports, China has resorted to exploiting loopholes. The sanctions law in America specifically names the CBI, so some trades have been routed via money exchanges in the Gulf instead. The countries are bartering too, with Iranian oil sometimes swapped for shipments of Chinese gold. China has also set up "swap-shop" segregated accounts which it credits when it receives oil, allowing Iran to buy Chinese goods, according to Mark Dubowitz of the Foundation for Defence of Democracies, a think-tank.
This oil-swapping system is hard to stop. Accurate oil-trade data are collated by monitoring the tracking beacons big tankers must carry in order to prevent collisions. But the Iranian fleet has been flouting safety rules and turning its beacons off since April, according to the IEA, allowing vessels to make clandestine port visits and mid-ocean oil transfers.
Even if it could spot illicit transactions, America might still choose to ignore them. The sanctions are preventing Iran from getting hold of the hard currency it needs to defend its peg, among other things. And confrontation with China could be costly for America. Of the $12 trillion-worth of Treasuries held abroad, China owns over 13%. Excluding China from America's financial system would wall off a big customer for its own debt.
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