The Western powers have been pulling out every economic weapon in their arsenal of sanctions in an effort to shut down the Iranian nuclear program. At first, the renewed efforts seemed to have a serious impact on the Middle Eastern nation’s finances, but more and more it looks like Iran is finding ways to work around the sanctions, according to Reuters.
As much as Western governments may have taken a firm stance against Iran, plenty of customers remain, particularly in East Asia. Continuing demand from major consumers like China and Japan has helped to stem the lost business from Europe and other countries that cannot surmount to restrictions on Western tanker insurers.
At the end of the 2011, Iran was exporting 2.2 million barrels of oil per day, making it one of the largest exporting countries in the world and among the top players within the Organization of the Petroleum Exporting Countries.
Nine months later, after the implementation of strict sanctions barring European and American insurers from covering tankers carrying Iranian crude oil in July, that number had plummeted by more than half to amount to little more than 900,000 barrels per day.
Some of that loss was compensated for by an uptick in fuel oil sales, but it nevertheless represented a massive hit to the country’s finances.
Then, as the sanctions came under closer scrutiny and demand continued unabated despite higher prices, customers began to find ways to avoid the sanctions. In the case of China, the country sold several oil tankers to Iran to help ease constriction in shipping that was disrupting supplies.
By the end of the year, exports had recovered substantially to 1.4 million barrels per day, rolling back nearly two -fifths of the losses from the previous year. Most of this increase went to China, but other Asian customers like Japan and India also played a role.
Future of sanctions uncertain
The surprising recovery at the end of last year certainly represents good news for a country that reports suggest was struggling mightily on the domestic front. However, most analysts are not predicting the end of the Western sanctions.
One analyst from oil and gas consulting agency FGE told Reuters that Iran’s exports are expected to fall to between 1.1 million and 1.3 million barrels per day during the first quarter. These numbers were backed up by a second industry source, who estimated 1.3 million barrels per day for the month of January.
Part of this drop, however, can be attributed to a new round of sanctions planned for implementation in February. These new sanctions will prevent Iran from moving funds abroad back home, depriving the country of much of its earnings from its oil sales.
Notable deals returning
Even with the new round of sanctions set to go into effect, however, Reuters reported last week that South Korean chemical and plastics giant Samsung Total Petrochemicals Co. had struck an agreement to purchase heavily Iranian crude far below current oil prices.
The news source estimates that Samsung could save $6.7 million by importing from Iran, despite forcing the company to jump through some added hoops.
The company had ceased imports during the summer last year as it worked out the implications of the new sanctions, ending a contract for 550,000 barrels per month. Iran has made generous offers to lure back these clients, however.
“What we have seen is that when Iran is pushed to a do-or-die situation, they have looked for creative solutions to get around sanctions,” Elena McGovern, an oil and gas analyst for Business Monitor International, told Reuters. “The system will always find a way to cope.”
In the meantime, however, new oil investments are likely to benefit from higher crude oil prices if only because of the fear of further action, even if more Iranian crude does make its way into the market.