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Report shows sanctions drastically cutting Iran oil exports

Published October 16, 2012 1:01 pm

IAE • The agency says the country's exports have fallen by almost a third.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Washington • Stringent new sanctions imposed by the United States and European Union against Iran have curbed the country's oil exports by more than 1 million barrels of oil per day, according to new data released by the International Energy Agency.

The IEA data, released late last week as part of a little-noticed annual report, paints the first detailed picture on how hard the sanctions have hit Iran: The agency estimates the country's oil exports have fallen by almost a third over the past three months, representing a substantial loss of income for the government.

The effect has been compounded, the agency said, because Iran's government was apparently caught off-guard by buyers' strict compliance with the sanctions and by new restrictions preventing shipping insurance for vessels delivering Iranian goods. Actual deliveries of oil from the country dropped to a new low of 860,000 barrels a day in September.

The sanctions are only getting tighter. On Monday, the European Union voted to expand measures already in place, targeting banking institutions, energy companies and shipping. It said in a joint statement that the measures were aimed at the regime and "not aimed at the Iranian people."

Despite the severe toll taken by the sanctions, regional analysts warn that the measures are unlikely to persuade Iran to abandon its nuclear program, even as it faces a deepening economic crisis at home.

Turkey, a key ally of Western nations in the region, has proven crucial to keeping Iran's economy afloat. Turkey relies heavily on Iranian oil and was granted an exemption to new U.S. sanctions in return for voluntary efforts to reduce its Iranian imports. Some Ankara-based analysts said Turkey is unlikely to be willing or able to cut off Iranian oil imports entirely.

"Turkey is moving based on goodwill, but as being neighbor of Iran and bounded with some legal engagements cannot act in a radical way as the E.U. countries did this summer," said Hasan Selim Özertem of Turkey's International Strategic Research Organization. "Looking at the cumulative data, Iran has a dominant share in Turkey's crude oil imports. Thus, it is not easy to change position overnight."

Turkey's primary refinery equipment is also engineered to handle Iranian oil, Özertem added, making a shift difficult.

The country has proven willing to aid Iran's trade situation in other ways: Iran is increasingly sourcing its imports through Turkey as other trading partners become unwilling to deal with it. Iran imports substantial amounts of food, as well as manufacturing materials and consumer goods.

Earlier in 2012, Özertem said, Turkey exported $8.5 billion of goods to Iran - up from just $3.9 billion the year before.

Elsewhere in the region, Iran still appears able to aid its allies financially. Documents obtained by the Syrian opposition suggest Iran's Export Development Bank is still providing financial support to the regime of President Bashar al-Assad, even though that government has also been targeted by sanctions. The bulk of Iranian support to Syria, however, is non-financial, comprising both resources and technical assistance.

One U.S.-based economist said the broad picture is that sanctions against Iran are proving effective, but not decisive.

"I think this is a long-haul thing," said Djavad Salehi-Isfahani, professor of economics at Virginia Tech and non-resident fellow at the Brookings Institute. "The government has some maneuverability to shift the pain around, and make sure that the people who are more likely to support it suffer less, while people who have both means to withstand the sanctions, and are less supportive of the government will bear a greater proportion of the pain.

Salehi-Isfahani added that some Iranians are going to increasing question the logic of sanctions.

"They didn't vote for Iran's nuclear program, they don't think the West is justified in pressuring them to stop the program - the whole idea of Iran as the worst enemy of the West does not sell in Iran," he said. "This is not the equivalent of the one good example of sanctions having an effect, which was South Africa, where the majority of the population, even if they suffered, identified with the cause."