Oil exports make up 80% of Iran’s total export earnings and 50-60% of government revenue according to the EIU report. Iran’s government budget for the current fiscal year ending in March forecasted oil exports of 2.2 million barrels a day (b/d). The International Energy Administration (IEA) recently estimated sales of around 1.1 million b/d, resulting in monthly losses of $5 billion for Iran according to a widely cited estimate. The sanctions and the Islamic Republic’s habitual economic mismanagement have also combined to send Iran’s currency plunging in value over the last six months.
With many of Iran’s oil customers bowing to Western sanctions, Iran’s dependence on the four Asian countries has grown substantially. Tehran has become especially dependent on China, which has long been its primary trading partner. Still, China is now estimated to purchase roughly 50% of Iran’s total oil exports despite having decreased its oil imports from Tehran by 23% year-on-year through the first 11 months of 2012.
India has similarly seen its reliance on Iranian crude decline sharply, with year-on-year imports down 17% in the first 8 months of 2012. Indian officials have also suggested they plan to cut imports by an additional 10-15% in 2013.
Both South Korea and Japan reduced their oil imports from the Islamic Republic by around 40% in the first 11 months of 2012 and pledged further reductions in 2013. Seoul has implied it could decrease its year-on-year imports by as much as 20% through the first six months of this year ending in May.
A U.S. sanctions bill signed into law by President Obama on December 31, 2011 cuts off access to the U.S. financial system to any entity conducting business with Iran’s central bank—which is the country’s primary mechanism for processing oil payments—along with other large Iranian banks. The legislation does allow the Obama administration to grant three-month renewable waivers to countries that continuously reduce their crude purchases from Iran. China, India, South Korea, and Japan have been granted two waivers since the sanctions went into effect in July 2012.
much of the exchanges have been done in raw gold according to many reports. Maybe gold isn’t as effective as many hope. I thought the idea was dubious. and now the bias…
Meanwhile, it seems increasingly apparent that the Western powers do not have a well-thought out endgame for the sanctions regime, short of Iran capitulating completely. In this sense, the sanctions against Iran are not only increasingly similar to the ones imposed on Saddam Hussein’s Iraq during the 1990’s, but also to the U.S. surge in Iraq that failed to achieve its political objectives despite being militarily successful and dramatically reducing violence. Indeed, with regards to current Western strategy towards Iran, one’s tempted to invoke David Petraeus in asking: “Tell me how this ends.”
…the endgame was always bombing Iran and not sending ground troops. Or at least that is what it should be. They are trying to tell us again that we have to be responsible for the countries we attack because they are hostile. Here is the secret the media doesn’t want you to know. America doesn’t need to fix what it breaks.
The situation is only likely to worsen for Iran in the months ahead. To begin with, global energy trends and continued sluggish economic growth make it easier for Western nations to sustain the sanctions without causing a spike in energy prices.
nice to know there are benefits to my unemployment that leads me to my blog – Noah