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As EU tightens the screws, Iran looks toward China (VIDEO)

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“We will have to ask other countries, especially China, to [purchase] more oil, though they will try and push us to give more of a discount,” says a senior National Iranian Oil Company official.

Why Iran has discounted its oil sales

In fact, Iran has already been offering discounts to foreign customers of Iranian oil for more than a year in order to offset the rise in transaction fees and lengthy bureaucracy resulting from US financial sanctions and international sanctions.

"Somebody will buy their oil, and Iran would earn less revenue,” confirms Hossein Askari, an economist at George Washington University who has advised Persian Gulf governments on energy policy. “Iran would be forced to barter.”

Indeed, Tehran's “bartering” with global trading partners, through which foreign refineries pay for Iranian oil using their own local currencies and keep the cash in locally held banks outside of Iran, has risen in line with heightened implementation of US Treasury sanctions on Iran's banking sector. In China alone, Iran has for the past year been forced to keep most of its cash from oil sales in Chinese banks, instead using the funds to finance imports of Chinese goods back into the Islamic Republic.

By the end of 2011, Iran will have an estimated $5 billion of cash trapped in South Korea, according to Reuters.

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