Assuming this report is accurate, on the surface this would seem to be a significant action by China.  Will be interested in hearing analysis by our China Hands and to see what the effect will be on both north Korea and Iran.

V/R

Dave

China holding up shipment of Iranian petroleum to North Korea

October 20, 2013http://ajw.asahi.com/article/asia/AJ201310200026

By KOICHIRO ISHIDA/ Correspondent

DALIAN, China--China is holding petroleum that was heading to North Korea from Iran in an apparent attempt by Beijing to maintain its control over Pyongyang, sources said.

According to Chinese sources, the petroleum was part of North Korea’s contract to import about 500,000 tons of condensate, a light oil, from Iran. North Korea, seeking to diversify its energy sources, started discussions on the deal last year.

The agreement was reached with the cooperation of a major Chinese state-run petroleum company.

The condensate is believed to have been shipped from Iran over a number of occasions on tankers registered to a third nation. But Chinese authorities ordered the tankers to stop when they reached the Chinese coast in the Yellow Sea this spring.

The ships were then towed to ports in Dalian, Liaoning province, and Qingdao, Shandong province. Sources said the condensate remains in those ports, which have restricted access to outsiders.

China is believed to have asked North Korea to pay about $2 million (about 196 million yen) for storage expenses.

“Once China realized that North Korea was beginning to depend on Iran for petroleum, China began using various measures to remain engaged so it can maintain its influence over North Korea,” a diplomatic source knowledgeable about relations between China and North Korea said.

Under the North Korea-Iran contract, Pyongyang is to pay Tehran for the condensate, but the condensate itself must be first sent to a Chinese state-run petroleum company.

“Because North Korea does not have the most advanced refineries, it had to ask China to refine the condensate,” a source in the petroleum industry said.

It is unclear what legal basis China is using for holding up the shipments because condensate and other petroleum products needed for daily living are not banned under U.N. economic sanctions imposed against North Korea.

However, one source involved in the transaction said, “As part of the economic sanctions that were imposed against military actions taken by North Korea, inspections were carried out by Chinese authorities, which asked that the petroleum be kept at the port.”

After Pyongyang conducted its third nuclear test in February, the U.N. Security Council imposed additional sanctions that obligated U.N. member nations to inspect cargo headed to North Korea if there were suspicions those ships carried banned goods.

China agreed to the additional sanctions, and it may have extended the range of inspections to the latest shipment because a state-run company was involved.

Until now, China is said to have provided about 80 percent of the petroleum used in North Korea. The main means of transport were through a pipeline that runs along the Yalu River between the border of the two nations as well as by ship.

(Continued at the link below)

http://ajw.asahi.com/article/asia/AJ201310200026