Iran Oil Exports Hit Highest Record In Five Years
Iran’s oil sales have reportedly hit a record high since the US withdrew from the nuclear deal and reinstated sanctions in 2018, but pundits wonder where the money goes.
Iran’s oil sales have reportedly hit a record high since the US withdrew from the nuclear deal and reinstated sanctions in 2018, but pundits wonder where the money goes.
In an article on Friday, Bloomberg confirmed earlier claims by Islamic Republic officials about the rise in exports, saying that Iranian oil is quietly flooding into the global market again.
Citing data from market analytics provider Kpler, global strategic energy-consulting firm SVB Energy International, FACTS Global Energy Group (FGE) and the International Energy Agency, Bloomberg said that Iran’s exports have surged to the highest level in almost five years, “fortifying its re-emergence on the geopolitical stage while posing risks for a fragile global crude market.”
OPEC+ countries have repeatedly cut production to restrict supplies and control the plummeting prices.
“Iran’s crude exports smashed it last month,” said Homayoun Falakshahi, a senior analyst at Kpler. “Iranian crude is extremely interesting for those willing to take the risk to buy.”
As expected, Tehran’s ally China is its main customer, albeit with hefty discounts, which help smaller Chinese refiners offset a recent slump in profit margins.
While tanker-tracking shows that China has remained Tehran’s main buyer, official data registers no imports from the Islamic Republic in the past year. Instead, purchases have soared from Malaysia, where Iranian cargoes are often sent on a so-called “dark fleet” of tankers with transponders deactivated to avoid detection for transfer to another ship, blurring the origins of the consignment.
This practice has been going on since 2019, when the United States imposed full third-party sanctions on Iranian crude exports.
The regime is trying to save its battered economy through all means available, including mending relations with regional rivals Saudi Arabia, Bahrain, and Egypt; fostering ties with China; and most recently a tentative behind-the-scenes diplomatic effort to deescalate with Washington and the UN nuclear watchdog, the IAEA.
However, the extra sales have not been translated into tangible results in its rampant inflation rate at 70 percent, plunging national currency and popular dissatisfaction, manifested in periodic protests and strikes all over the country.
“China’s willingness to support Iran by taking its sanctioned oil, suggests a slight improvement in Iran-China relations,” Bloomberg quoted Greg Brew, an analyst at consultants Eurasia Group. He added that “All of this supports the view that Iran’s position is improving, along with its advancing normalization with other regional states,” especially given the fact the Beijing itself brokered the detente between Tehran and Riyadh, a rapprochement that was seen as a Saudi favor to China.
According to an article in Iranian daily Donya-e-Eqtesad, Iran’s oil exports – including crude, oil products, natural gas and condensates – was about $118 billion in 2011 when international nuclear sanctions were imposed, slashing the exports to half of that amount. Then came the 2014 oil price crash that pushed revenues down to $33 billion.
After the JCPOA was signed and international sanctions were lifted in 2015, Iran’s revenues began to rise and reached $66 billion in 2017 for a short while before the US pulled out of the JCPOA in May 2018 and again imposed sanctions that expanded a year later. By 2020, exports declined to about $20 billion and by some accounts to less than $10 billion.
The picture began to change toward the end of 2020 as Joe Biden won the presidential election and vowed to return to the JCPOA. At that point China began to increase oil imports from Iran.
Crude shipments have doubled since last autumn to reach 1.6 million barrels a day in May, even as American sanctions remain in place, Bloomberg claimed, citing Paris-based IEA as estimating that production has hit 2.9 million barrels a day, the highest since late 2018. “Consultants SVB Energy, Petro-Logistics SA and FGE believe that output is even higher, maybe surpassing 3 million barrels a day,” the report said.
Iran’s surge in shipments – and presumably the rise in revenues – has baffled economists and business analysts in Iran and abroad about where such a huge income is being spent, given that Iran’s currency has halved in value since mid-2022.
Mousa Ghaninejad, a professor of economics, recently said that “the oil money belongs to the people,” noting that “if the government takes it and spends it, so it should remove the taxes.”
He made the comment as the Raisi administration raised taxes by 59 percent in the budget bill of the current Iranian year (started in March), a staggering burden on its people amid high inflation and growing poverty. The total tax revenues planned in the draft budget will surpass $20 billion based on the current rate of exchange. In Iranian currency, however, this is a staggering 8.3 quadrillion rials – that is with 15 zeros.
Despite the huge tax bill for the people, the government budget still has a 50-percent deficit, due to a chaotic downturn in the economy mainly triggered by US sanctions on its oil exports and international banking.
According to a report by Tejarat News, the oil revenues are spent to balance the budget deficit as well as importing food items.
Aside from an overestimation of Iranian oil shipments, another explanation for the lack of a positive impact from increased exports is suspected deep discounts offered to China. Tejarat news for example said that China pays only two-thirds of the agreed price in cash and the rest is barter.
Iran also must undergo many other expenses for the illicit shipments and then lose more money trying to recoup revenues despite the US banking sanctions. Many different types of middlemen take huge profits for facilitating all these transactions. Otherwise, if Iran is charging even $60 a barrel, at the current rate of estimated exports, it would make $33 billion annually just from crude exports and more than $20 billion from oil products, balancing its budget.
The State Department spokesperson Matthew Miller in his press briefing on Thursday responded to questions by reporters about a possible deal in the making, saying, “with respect to Iran’s nuclear program, there is no deal.“
But the fact remains that the Biden administration has had even direct talks with Iranian diplomats for the past 7-8 months according to multiple reports, in addition to talks mediated by Oman and others.
Also, Washington agreed to the release of $2.7 billion of Iran’s money frozen in Iraq for “humanitarian” purposes. Some argue that no matter what the formal label of the arrangement may be any funds Iran can use for imports alleviates financial pressure from the cash-strapped regime.
Given these concerns both Republicans and Democrats in Congress have begun stirring to make sure that the administration does not circumvent the lawmakers and according to law informs them of any deals with Iran.
"I'm extremely disappointed. To think this will end their uranium enrichment is childish. They'll continue to act in bad ways. When Iran is selling oil that it shouldn't, it gets those dollars and pumps it right back to extremist organizations," Sen. Joni Ernst told Iran International's Arash Aalaei.
The House Foreign Affairs Committee Chairman Rep. Michael McCaul sent a letter to President Joe Biden on Thursday saying, “I am disturbed by recent revelations that the Administration has re-engaged in “proximity talks” with the Iranian regime, and that the results of these discussions have included the apparent greenlighting of sizable payments to Iran.“
McCaul urged Biden to respect the Iran Nuclear Agreement Review Act of 2015 (INARA), which was enacted during the finalization of the Joint Comprehensive Plan of Action (JCPOA) in 2015 to allow Congress to oversee dealings with Tehran. The Obama administration decided not to make the JCPOA nuclear deal a treaty, given opposition in Congress at the time and agreed to INARA to neutralize opposition among lawmakers.
“I urge the Administration to remember that U.S. law requires that any agreement, arrangement, or understanding with Iran needs to be submitted to Congress pursuant to INARA. Any continued obstruction will rob the American people, and in particular the Gold Star families whose loved ones were killed by Iran-backed terrorism, of answers about why the United States is facilitating the lining of Iran’s coffers,” McCaul said.
The Jewish insider reported Thursday that Senator Lindsay Graham (R-SC), joined by Bob Menendez (D-NJ) and Sen. Richard Blumenthal (D-CT), also introduced legislation on Wednesday that would require the director of National Intelligence to notify Congress within 48 hours if Iran produces or possesses uranium of greater than 60 percent purity.
The Iranian Enrichment Monitoring Act is a new attempt led by Graham, Menedez and other lawmakers to ensure congressional oversight of how the executive branch deals with Iran’s nuclear program.
The website also quoted several senators, some supporters of the JCPOA voicing concern about secret dealings with Iran and releasing funds to the Iranian régime that continues its „malign activities“ in the region and sending arms to Russia.
State Department’s spokesperson Thursday more clearly listed what the administration seeks in its dealings with Iran.
"Number one, we want Iran to take steps to de-escalate tensions, which of course includes steps to curb its nuclear program," Miller said, and added that Iran should cease its actions that destabilize the Middle East.
"Number three, we want Iran to stop its support for Russia’s war on Ukraine,“ he said, referring to a new complication with Iran that emerged in mid-2022. He also demanded the release of US citizens Tehran has imprisoned „for political leverage."
Raisi, who arrived in Cuba for the last leg of his tour early Thursday, was received by Cuban Foreign Affairs Minister Bruno Rodriguez upon arrival at the airport and met with Cuban President Miguel Diaz-Canel at the Palace of the Revolution in Havana.
"Venezuela, Nicaragua, Cuba and Iran are among the countries that have had to heroically confront sanctions (...) threats, blockades and interference by Yankee imperialism and its allies with a tenacious resistance," Diaz-Canel told his Iranian counterpart, adding "This visit reinforced our conviction that we have in Iran a friendly nation in the Middle East, with which to confide ... and talk about the most complex global issues."
Raisi, in his turn, said, "The conditions and circumstances in which Cuba and Iran find themselves today have many things in common. Every day our relations grow stronger."
Raisi had earlier visited Venezuela, where he and President Nicolas Maduro pledged to boost bilateral trade from $3 billion to $20 billion within an unspecified time frame. Except Iran shipping oil and fuel to Venezuela and reportedly receiving gold, there is not much else the two sanctioned countries can trade.
He later visited Nicaragua, where he had a welcome ceremony at the Non-Aligned Square in the capital Managua led by President Daniel Ortega.
During all the stops, Raisi and the head of state of the host country oversaw ceremonies to signa raft of so-called economic agreements in a show of unity against the United States.
Common themes in Raisi’s speeches throughout the entire tour were creating a “new world order” that would overturn the US "domination" and cooperation among independent -- read sanctioned -- countries in the face of “the imperialist regime,” to become more resilient against US demands and its sanctions.
The three countries chosen as Raisi’s destination South are under scores of embargos over their shady economic dealings with blacklisted outfits such as Iran’s Revolutionary Guards and their track record of crackdown on dissent.
The Islamic Republic is relishing a sense of undermining its archrival, the US, as Raisi toured fellow sanctioned nations, celebrating it as a diplomatic coup de force at ‘America's backyard’.
During a joint press conference with his Nicaraguan counterpart on Wednesday, Raisi stressed the need for cooperation among “independent countries” towards neutralizing the predicaments that they commonly face, particularly Western sanctions.
"Cooperation between Latin American countries and other independent countries across various regions can forge a unity that can both neutralize sanctions and increase the capacities of the countries in question," he said, claiming that Iran “turned threats and sanctions into opportunities, and through these opportunities made great progress in different areas."
Riais's claim of successes contradict Iran's dire economic crisis and the daily criticism in Iran even by some of his allies.
Echoing similar anti-US sentiments, Ortega said: "We pay homage along with our heroes and martyrs, to all the heroes and martyrs of Iran and in particular to General Qassem Soleimani, who was assassinated by Yankee imperialism when he was fighting against terrorism."
The Iranian president was accompanied with a large delegation made up of ministers and officials as well as his wife, who also made headlines for her controversial remarks during an interview with a Venezuelan TV channel.
Claiming that governments abuse at the workplace in the name of freedom, Jamileh Alamolhoda – daughter of firebrand cleric Ahmad Alamolhoda – called it an example of violence when women study and work like men.
"We want women to remain women. Why should we be like men? Why should we study, work or live like men? This is a form of violence," she said.
