The Wall Street Journal on Monday conveyed reports that Tehran has for the past six months exported a record amount of crude oil to China, which the outlet noted comes “amid a loosening of U.S. sanctions” as Iran negotiates with the P5+1 powers – including Beijing – over its nuclear program.

Iran and the P5+1 had last week agreed to extend by four months nuclear negotiations, just weeks after reports emerged that Iran had for eight straight months violated crude oil export restrictions put into place by the interim Joint Plan of Action (JPA), which expired Sunday.

The JPA limited Iran to exporting roughly 1 million barrels per day (bpd) of crude averaged out over the JPA’s six-month implementation window. Bloomberg on Monday reported that oil exports from the Islamic republic are set to remain near the highest level in two years:

Sales of crude and condensates by Iran to six main buyers averaged 1.27 million barrels a day in the first six months of the year, according to data compiled by Bloomberg from customs statistics and International Energy Agency estimates. Shipments will stay near that level in the second half, according to the analysts Bloomberg surveyed on July 16 and 17.

“Iran’s going to want oil exports to keep edging up, and the U.S. has been willing to allow some wiggle room,” Robin Mills, an analyst at Manaar Energy Consulting & Project Management, said by phone from Dubai yesterday. “The extension is a sign they’ve made progress on nuclear talks and think they can reach a deal. The U.S. won’t let oil exports get in the way.”

Analysts this week expressed explicit concern over among other things the diplomatic repercussions of the Journal report, including Washington Institute Managing Director Michael Singh:

“There are already signs that the sanctions are getting harder to enforce. I think some of you will have seen the reports that China has increased imports of oil from Iran to the highest level they’ve ever been for a six-month period. That’s obviously a concerning report and it raises a real conundrum for U.S. officials because it raises the possibility that you could have to take action against China under sanctions laws even while these talks are going on, which is obviously something that the administration would rather handle, I’m sure, diplomatically.”

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