oil platform rig
© BloombergAn offshore oil platform in the Persian Gulf near Iran in 2017. China is expected to import 918,000 barrels a day from Iran in March.
China has sharply increased its imports of oil from Iran and Venezuela in a challenge to two Biden administration foreign-policy priorities, according to U.S. officials, undermining key diplomatic leverage Washington needs to restart long-stalled negotiations.

China is expected to import 918,000 barrels a day from Iran in March, which would be the highest volume since a full U.S. oil embargo was imposed against Tehran two years ago, according to commodities-data company Kpler.

That trend is confirmed by other shipping trackers, some of which see those sales at 1 million barrels a day.

"If it sells 1 million barrels a day at current prices, Iran has no incentive to negotiate," said Sara Vakhshouri, president of Washington-based SVB Energy International and an expert on Iran's oil industry.

President Biden's administration has sought to engage with Iran to return to a 2015 nuclear deal that was exited by his predecessor, former President Donald Trump. But Tehran has rebuffed overtures so far.

Comment: Biden's administration has sought to pressure Iran into doing as it wishes through the continuation of its starvation sanctions.

China's oil purchases from Venezuela, where the U.S. has been trying to use sanctions to pressure the Maduro regime into holding credible democratic elections, also are growing, according to London financial data provider Refinitiv.

Comment: Meanwhile the US' 'credible' man in Venezuela has fallen out of favor: EU backs away from Venezuela's Guaido, echoing Biden's moves that he is done

Rising oil shipments to China, Iranian and Venezuelan officials said, followed Mr. Biden's offer of relief to Iran in return for the country's compliance with an international nuclear agreement and to Venezuela if it organized free elections. Mr. Trump pursued a policy of escalating sanctions pressure against both countries.

China is also increasingly flouting international sanctions on North Korea and is no longer trying to hide some of its smuggling activity as it seeks to help Pyongyang, U.S. officials said recently.

Comment: Unilateral, inhumane and unreasonable sanctions are becoming increasingly ineffective in a multilateral world.

Combined with rising oil prices, the developments have diminished pressure for Tehran and Caracas to negotiate with Washington, these people said.

"The informal Chinese purchases have reduced the need to negotiate on oil sanctions" for Tehran, one Iran-focused U.S. official said.

A State Department spokeswoman dismissed the idea that the Biden administration would ease sanctions without action by Tehran to comply with the nuclear deal, known as the Joint Comprehensive Plan of Action, or JCPOA.

"We are ready to reengage in meaningful diplomacy to achieve a mutual return to compliance with JCPOA commitments, which would of course include lifting sanctions on Iranian oil exports," she said. "But our current Iran-related sanctions remain in effect unless and until they are lifted as part of a diplomatic process, and we will of course address any effort at sanctions evasion."

Since November, Iranian oil traders say they have been approached for new sales by Asian buyers seeking to take advantage of discounted prices because purchasers feel sanctions pressure will ease under the Biden administration.

Iranian officials and traders have become increasingly adept at evading sanctions, carrying out covert transfers in the Persian Gulf and in South Asia to conceal the origin of their cargo and finding new ways to get paid by using nonbanking platforms such as cryptocurrencies.

On Monday, Iranian First Vice President Eshaq Jahangiri said Iran's oil exports had increased in recent months, though he didn't give any details.

"There were certain problems with money transfers. So we had to come up with certain plans, methods for bringing in the oil export revenues, and we recently had a breakthrough," Mr. Jahangiri was quoted as saying by state-run news agency IRNA.

Kpler analyst Homayoun Falakshahi said ship tracking showed the fastest-growing buyer was state-run China Petroleum & Chemical Corp. , or Sinopec, the country's largest refiner. After cutting staffing and spending in the past two years, Sinopec is posting new job offers online and talking with the government on doubling its production in the country, according to former Iranian oil officials and an adviser to the company.

Officials from Sinopec and the Chinese embassy in Washington didn't return requests for comment. Chinese officials have long criticized U.S. policy in Iran and Venezuela, as well as its financial diplomacy, as unilateral and coercive.

Washington still hopes to entice the Islamic Republic with the more substantial relief that would come with the release of billions of dollars in frozen oil money and a return to official crude sales. In exchange, the U.S. wants Iran to comply with the nuclear deal despite repeated breaches and wants to tighten controls on Tehran's ballistic program and other efforts that weren't covered under the original nuclear agreement.

Meanwhile, Iran has helped Venezuela by supplying petroleum products, selling diesel and other critical energy needs in exchange for Venezuelan oil and gold. That oil is then sold off in global markets, yielding revenue for Iran and reinforcing Mr. Maduro politically.

For the U.S.-China relationship, already strained by a range of security and economic disputes, Beijing's crude trade with two of Washington's top foes adds another major irritant.

"This is a complex relationship and maybe the most consequential relationship for both of our countries, and it has adversarial aspects, it has competitive aspects, and it has cooperative aspects," Secretary of State Antony Blinken said earlier this week.

U.S. officials have reminded China that firms helping import oil from Iran risk sanctions and say Beijing could face punishment over its Venezuelan trade. The State Department declined to comment on its communications with China.

"The Maduro regime has adapted to oil sanctions, finding a way around them to deliver oil to China and Russia, and Iran has been helping them," one senior administration official said. "So we're going to use our sanction tools to make sure that we're eliminating those options" for the Maduro government, the official said.

Others, however, say the administration will also be careful to balance such policies with American economic interests. "In some cases, we have not sanctioned [China] because of the impact on our economy. If we hit hard, they could retaliate," said another U.S. official.

Biden administration officials are meeting Chinese counterparts for the first time this week in Alaska.