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Oil freight rates spike: Diplomatic strife shows weaknesses of Chinese shipping giant COSCO

Though the validity of US foreign policy towards the Iranian nuclear problem conjures much controversy, the 28% spike in oil freight rates between the Middle East and Asia which followed charges issued to parts of COSCO Shipping showed the extent of control the United States still has over the world oil market, revealing in a very public way weaknesses Beijing must seek to overcome. Already jittery thanks to global trade wars and fears of a looming recession, the oil markets scarcely needed the introduction of further problems. COSCO Shipping Tanker (Dalian) Co and COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co were added to the Office of Foreign Assets Control (OFAC) list of nationals and blocked persons list. US sanctions imposed on Iran prevents US citizens and companies from doing business with companies deemed to have fallen foul of sanctions. Consequently the reach of US soft power is extensive at present. Though Beijing has sought to position China on the international stage to be as independent of the United States as possible, enabling Chinese interests to be pursued without interference, the spike in oil freight rates demonstrates shortcomings compared to the power yielded by US President Trump.

The suspension of COSCO shares in the oil transport unit serves to show the extent of damage done to the company by US allegations of transporting illicit oil out of Iran. Now the company is being shut out of the trade between the United States and the Far East the implications could be far reaching. Officially the cessation of share trading occurred owing to the need to verify rumors that subsidiaries would also be subject to US sanctions. Shares resumed trading on Monday 30th September 2019. Upon the opening of trading the share price of COSCO Shipping Energy Transportation fell 23% compared to the previous closing price. COSCO Dalian is believed to have contributed 40% of profits to parent company COSCO in the first half of this year, meaning the potential damage to the company by the US reaction to transporting Iranian oil could very well be substantial.