Daily Management Review

Iran hopes to keep its oil export with the help of China


07/18/2018


Tehran hopes to protect its oil industry with the help of Asian buyers and, first of all, the Chinese.



yeowatzup via flickr
yeowatzup via flickr
Washington demands that no one buys Iranian oil, and threatens those disobedient with strict sanctions. The fate of the Iranian oil industry will largely depend on behavior of the largest customers: China, Japan, India and South Korea. Tokyo, Delhi and Seoul have already begun to reduce purchases of oil from Tehran, to completely abandon it by the beginning of November, when US sanctions against Iran entry into force.

As for China, Tehran still believes that the country will help. However, it is not as simple as it might seem at first glance. On the one hand, China can afford not to pay attention to the White House, as the two countries are being in the actual state of a trade war. On the other hand, the Chinese do not want to "fight" against the Americans. It is possible that in order to reach a compromise and to avoid further aggravation of trade relations with the US, Beijing can make concessions and, for example, "surrender" Iran with its oil, one of the main sources of filling the Iranian budget.

"If China continues to buy Iranian oil, we will be able to fight the United States," said an Iranian analyst who asked to stay anonymous. "China is the only country that can tell Americans: "Get off!"

China, India, Japan and South Korea accounted for almost two-thirds (65%) of Iranian oil exports, which amounted to 2.7 million barrels per day in May, according to Kpler consulting company. Iranian oil is also bought in Europe, Turkey and the entire Middle East. Iranian news agency Mehr reported in July that, according to the oil company’s forecasts, the volume of oil exports from the Islamic Republic of Iran will be reduced by half a million barrels a day. However, officials expect a decline in oil exports by at least 1 million bpd, and some of the most pessimistic oil analysts forecast even a collapse by more than 2 million.

So far, China has showed no signs of a change in attitude towards Iranian oil, unlike its neighbors.

"Unilateral sanctions against Iran should be abolished," the Foreign Ministry spokesman said at the briefing, "Because they are counterproductive."

Iran hopes for China’s help, but is still working on a variety of ways to combat American sanctions, starting from such radical ones as the closure of the Strait of Hormuz, and ending with quite "market" measure, for example, allowing private companies to sell oil abroad.

Iran is also counting on public opinion in Western countries and, first of all, in America. Obviously, its population does not like the rise in gasoline prices, to a large extent explained by US sanctions against Iran.

According to Hossein Kazempour Ardabili, the representative of this country in OPEC, the Easter country believes that that Saudi Arabia and other oil producers will not be able to compensate for the disappearance of large volumes of Iranian oil from the market.

"They will have to become hostages to the production capacities of Saudi Arabia and Russia," Ardabili warned. "Meanwhile, they cannot do much."

Russia, by the way, can play an important role in the unfolding events even though it does not buy oil from Tehran. For example, Moscow put forward the idea of exchanging Iranian oil for food and essential goods following the example of an Iraqi deal. In addition, according to high-ranking Iranian officials, Russia is ready to invest up to $ 50 billion in the oil and gas sector of Iranian industry.

When the administration of Barack Obama introduced sanctions against Iran in 2012, the country plunged into a deep recession. The Iranians just started getting out of it in 2016, after signing an agreement on Iran's nuclear program. Now, the first signs of impending troubles begin to appear again. For example, the threat of imposing sanctions provoked this year's devaluation of the rial by 50%.

"The US declared economic war to us," stated Vice-President Eshaq Jahangiri. "Therefore, we are plannig to export the maximum volumes of oil for export."

The effect of anti-Iranian sanctions will be felt not only by Iran, but also by oil buyers from Iran. It is not surprising that many ask Washington for exceptions for companies of their countries so that they can continue to conduct business with Tehran. The White House has so far denied all the petitions, although they do not exclude the possibility of such exceptions.

source: ft.com






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