Iranian Tanker Starts Reloading Oil Earlier Confiscated By US In Greece

Mohsen Khojasteh-Mehr, who also serves as the head of National Iranian Oil Company (NIOC), told Fars news agency that converting the memoranda of understanding (MoUs), sealed between NIOC and Russian Gazprom cover various fields, including petroleum and gas swaps.

Iran and Russia in July agreed to $40 billion in trade and investment projects.

A swap means that Iran would import gas from Russia and deliver a certain quantity to another country that has a gas purchase deal with Moscow if it makes sense geographically or in terms of available infrastructure. In this case, among Iran’s neighbors only Turkey has a gas deal with Russia, but it has its own pipelines, much shorter in distance than a 2,000-kilometer longer route from Iran.

Buying Russian gas to cover shortages

This makes the Iranian claim of a gas swap strange. What appears to be more likely is Iran buying Russian gas to cover its own production shortages.

Russia, in turn, which has been buying gas from Central Asian countries as a middleman and exporting it, has a shrinking market after sanctions following its invasion of Ukraine. Existing pipelines that send the cheap gas from Central Asia to Russia can now be reversed and pump it to Iran.

Last year, Russia imported 10.5 billion cubic meters (bcm) of Turkmen and 4.6 bcm of Kazakh gas through these pipelines, according to BP statistics.

There are also two pipelines, connecting Turkmenistan to Iran's northeastern regions with 20 bcm/yr capacity together. Currently Turkmenistan delivers only 1.5 bcm/yr of its gas via these routes.

Fars news agency says Iran can import 20 bcm/yr of Russian gas for both domestic consumption and delivery to Iraq and Turkey.

It seems the first variant is feasible, because Iran had 250 mcm/d gas deficit last winter (equal to Turkey's total daily gas demand in 2021) and every year the gap between its gas production and demand is growing.

Fars says Iran has consumed 9 billion liters of diesel and 6 billion liters of mazut in electricity generation last year, due to gas shortage. Iran can consume Russian gas in power plants to be able to export more diesel and mazut, making more profit, if the Russian gas is below regional prices.

Russia helping Iran in gas production?

Fars reported that another important MoU between NIOC and Gazprom is related to pressure enhancement of South Pars gas field in the Persian Gulf, shared between Iran and Qatar.

In the absence of Western technology, Iran has been unable to keep up production at the field, steadily losing out as its domestic consumption has increased.

Fars said if the sides finalize the MoU and sign an agreement, the contract value would be $10bn.

According to the NIOC, the Iranian section of South Pars gas field would pass the half-mark point of its life by 2023 and every year its production would decline 10 bcm. Iran and a consortium headed by French Total signed a $5-bn contract in 2016 to develop the South Pars, including the installation of a 20,000-ton platform with two giant compressors to prevent production decline.

Iran needs at least 10 to 15 such giant platforms (15 times bigger than the current active platforms) in South Pars. Each new platform costs $2.5 billion.

It is not clear how Gazprom would enhance the pressure of the gas field as only large Western energy companies can build the giant platforms with huge compressors.

When Total left the South Pars contract due to US sanctions, Chinese CNPC also abandoned the project due to its inability to build larger platforms. Gazprom also has no experience or the technology for such a project in the sea.

Qatar installed huge platforms, through contracts with Western companies, especially Total, and not only prevented a decline in production, but it has started new drillings to increase gas output by 30% in the next five years.

Regarding Iran's inability to prevent production decline from South Pars - a field that accounts for 70% of Iran's total gas output- it seems the country eyes Russian imports to compensate for the decline in South Pars and prevent further gas shortages in cold seasons.

Secretary of Iran's Aviation Companies Association Maghsoud Asadi-Samani told ILNA on Friday that the last Iranian flight to Kuala Lumpur will be operated by Mahan Airlines, which was the only airliner apart from flag carrier Iran Air with the capability of direct flights to Malaysia because of the long distance. 

The Iranian company Mahan Air was sanctioned by the US in 2008 for links to the Quds (Qods) Force of Iran’s Revolutionary Guard. 

Noting that Malaysian airports do not provide fuel to Iranian planes anymore, he said that fueling companies at Malaysian airports work with US companies, and these companies have been informed that they will be subject to punitive measures if they keep fueling the Islamic Republic’s planes.

Describing it as yet another blow that hit the country's aviation industry due to the US sanction, he said domestic airlines will lose the revenues of passenger transportation on this route, and “we will lose one of the bases in Southeast Asia.” 

Before the Covid-19 pandemic hit the world, demand for this route was high, and two to three flights were made per week, but during the health crisis, flights to Malaysia were temporarily suspended, and after that, there was only one flight per week.

The chamber of commerce regularly published trade statistics, but Fars angry at the low figure cited in the latest report asks why the organization is allowed to even speak about oil exports to China.

The figures published by the chamber of commerce show just $350 million in crude shipments to China through the end of May this year. Fars says why the chamber of commerce does not look at information from international sources that show hundreds of thousands of barrels of oil being shipped.

The answer should be obvious for anyone familiar with the issue. Tehran Chamber of Commerce has used official figures from Chinese customs, not estimates of illicitly shipped oil. China reports a fraction of the Iranian oil it buys. Most of its unreported imports come from brokers, who often mix the crude with cargos from other countries, falsify documents and hide the origin of the oil.

It is not clear if Fars was not aware of this or simply wanted to put pressure on everyone to say that the hardliner government in Tehran has been successful in boosting oil exports.

After the United States withdrew from the 2015 nuclear deal and imposed sanctions on Iran, China never stopped buying Tehran’s oil, but quantities in question were negligible until the end of 2020. At that time, the newly elected US president Joe Biden announced that he intended to return to the nuclear deal with Iran known as JCPOA. Soon followed the start of talks with Iran in Vienna and Chinese imports of Iranian oil took off.

The Biden administration apparently either did not want to enforce the sanctions while nuclear talks were taking place, or simply could not stand up to China.

By the beginning of 2022, Iran was selling at least 750,000 barrels of crude per day, mostly to China, according to multiple industry sources monitoring shipments. But official Chinese figures show an average of just 22,000 barrels being imported from Iran, and that is what the chamber of commerce has reported.

Although Iran keeps the quantities and destinations of its oil exports confidential, Fars, which often speaks for the Revolutionary Guard, said that China “is the main buyer of Iran’s oil during sanctions.”

One possible reason for the sensitivity shown by Fars to the issue could be reports in May and June saying that cheaper Russian oil has been competing with Iranian exports to China. Some sources said that in May Iran’s shipments halved as Russia offered larger discounts to China after international sanctions on its oil exports.

The hardliner government in Tehran confronting the worst economic crisis in the 43-year history of the Islamic Republic, keeps highlighting its success in selling more oil despite US sanctions. The claim seems to be true, but the economic situation remains dire because China does not pay much cash and sends goods that does not help the government’s cashflow problem.

In phone call with Josep Borrell, Amir-Abdollahian reiterated that all parties involved in the talks must take serious steps toward reaching the final text of an agreement, while four days of talks in Vienna ended with a “final” text presented by the EU to all parties.

Iran insists that the text offered for renewing the 2015 nuclear deal is not a final agreement but European officials described the document to journalists as a ‘take it or leave it’ offer for both sides. American and Iranian diplomats left Vienna Monday after the European chair of talks offered a fresh and “final” text for renewing the deal.

“Iran’s views and considerations on the ideas offered by [Borrell’s deputy] Enrique Mora have been conveyed to him and all parties [to the deal] are expected to show seriousness and resolve in order to achieve the final text of the agreement,” Amir-Abdollahian said.

Expressing hope that the path to a final agreement would be paved through realism, he added that any final agreement must meet the rights and interests of the Iranian nation and guarantee sustainable and effective removal of sanctions on the Islamic Republic. 

According to IRNA, Borrell said he believes that relative progress has been made during the latest round of the talks, which he described as positive. Borrell also said he would continue efforts to bring the viewpoints of all parties closer to reach a good result.

According to a document released on Monday, the Bureau of Industry and Security Office of Export Enforcement issued an administrative charging letter against Far East Cable on July 29, 2022. 

"The Charging Letter alleges that Far East Cable signed contracts with Zhongxing Telecommunications Equipment Corporation (ZTE), and Iranian telecommunications companies to deliver US-origin equipment to Iran as part of an effort to conceal and obfuscate ZTE’s Iranian business from US investigators," the document read, charging Far East Cable with 18 violations of Export Administration Regulations.

From September 2014 to January 2016, Far East Cable served as a cutout between ZTE which was under investigation by the US government for connections with Iranian telecommunications companies. 

In March 2017, ZTE pleaded guilty for its conduct related to these charges and broader violations of US export controls. ZTE paid a combined penalty of $1.19 billion in criminal and administrative fines at the time.

In July, the US Treasury issued sanctions on a new array of individuals and entities that help the Islamic Republic of Iran sell its petroleum and petrochemical products, and in June, the US sanctioned several Chinese, Emirati and Iranian firms over exporting the country’s petrochemicals.