Iran was China's third-largest supplier in 2011, accounting for about 557,000 barrels a day. And China is its top customer, accounting for 22% in the first half of 2011, according to the U.S. Energy Information Administration.
Although China was left off the list, the White House may grant it an exemption from sanctions if Beijing can provide assurances that it won't increase crude imports from Iran or show that it bought the crude at a discount, Mark Dubowitz, executive director at the Foundation for Defense of Democracies, a Washington think tank, said. The group has been pushing for more sanctions on Iran.
The assurances stop short of a Chinese commitment to reduce Iranian imports, but they could provide enough political cover for the U.S. to claim victory in reducing Iran's oil revenues and allow China to maintain crude imports from a key supplier, he said.
"The U.S. is in tough negotiations with the Chinese to find the right mix of volume reduction and price discounts to justify a waiver," Mr. Dubowitz said.
Washington isn't entirely convinced that Chinese cuts earlier this year will be sustained, as the decline was attributed to a commercial dispute between China International United Petroleum and Chemical Co., or Unipec, and National Iranian Oil Co.
The dispute was resolved in mid-February and imports from Iran began rebounding in April. All eyes will be on Chinese May import data, due later this month, which may show shipments returning to earlier levels.
China can afford not to increase imports of Iranian crude this year due to a slowing domestic economy, Michal Meidan, an analyst at political risk consultancy Eurasia Group, said.
However, its reasons for holding imports at current levels wouldn't be due to U.S. pressure or to pressure Iran over its nuclear activities, Ms. Meidan said.
"I don't think the Chinese would shy away from increasing Iranian imports in 2013 or if considerable discounts are on the table."