SINGAPORE: China has offloaded nearly four million barrels of Iranian crude oil into state reserve tanks in the southern port city of Zhanjiang over the past few weeks, a trade source and ship tracking specialist Vortexa Analytics said on Thursday.

The move comes as world powers are locked in tough negotiations with Iran to revive a 2015 nuclear deal that will include the lifting of US sanctions on Iranian oil. The former Trump administration pulled out of the deal and re-imposed sanctions.

Iran, which sits on the world’s fourth-largest oil reserves, relies heavily on oil revenue, but sanctions have prevented it from pumping at anywhere near capacity since 2018.

The refilling of China’s strategic petroleum reserves also comes ahead of a plan to release oil from its emergency stockpile in a rare coordination with the United States to help cool global oil prices which hit a seven-year high this week.

China has been importing Iranian oil under the radar which is not reflected in official customs data as buyers are fearful of invoking U.S. sanctions. On Thursday, China’s customs reported the first import of Iranian crude in a year despite ongoing sanctions.

China brought in 260,312 tonnes (1.9 million barrels) of Iranian crude oil in December, according to data from the General Administration of Chinese Customs, which last recorded Iranian oil inflows in December 2020 at double the volume.

A senior trade source with knowledge of the shipment told Reuters this particular cargo was offloaded into a state reserve site in Zhanjiang in late December.

This was followed by another similar-sized shipment that was discharged into the same port for the emergency stockpile, according to ship tracking specialist Vortexa Analytics.

“There were reports of importing Iranian crude earlier - but hush hush somewhat. Now I think the Chinese are testing openly to see U.S. response,” Tilak Doshi, managing director of Doshi Consulting in Singapore.

China’s National Food and Strategic Reserves Administration did not immediately respond to a request for comment. The U.S. State Department could not be immediately reached for comment.