Iran appears to have scored a victory in its cat and mouse battle with the West, with oil exports rising in December to the highest since European sanctions took effect.
But while Western attempts to crimp Iran’s oil trade are a serious business, the cut and thrust of action and counter-action resembles a Tom and Jerry cartoon, with each side scoring little victories but neither ever winning decisively.
Iran’s crude exports reached 1.4 million barrels per day (bpd), the most since last July, when European sanctions took effect, according to two industry sources, and customs and shipping data compiled by Reuters.
While this is still down on the 2.2 million bpd the Islamic republic exported in 2011, it’s well up on the 900,000 bpd shipped out in September.
The gain in exports is likely to encourage Tehran in its belief that it can “tough out” European and US sanctions aimed at forcing it to open its nuclear programme to international scrutiny.
But as Jerry the mouse often discovers, his successes against Tom the cat are short-lived.
Much of Iran’s success has been due to its ability to maintain shipments to two of its largest Asian customers, namely China and India.
China’s imports from Iran rose to 593,400 bpd in December, the second-highest month in 2012 after June as shipping delays eased as Tehran added secondhand tankers to its fleet.
In 2012, China’s imports from Iran fell 21 percent from 2011 to 438,448 bpd, which still makes Beijing the top buyer of Iranian crude.
China may reduce its purchases further in 2013, by up to 40,000 bpd, according to industry sources.
But it seems that both China and India are at best reluctant observers of Western sanctions, with both still willing to take Iranian crude and help overcome issues such as the European ban on its re-insurers, who dominate the global market, from covering vessels carrying Iranian cargoes.
While Western sanctions are costing Iran about $3.4 billion a month, based on the loss of about 1 million bpd of exports and a Brent price around $115 a barrel, seemingly enough to cause economic harm, this is not enough to cause Tehran to rethink its nuclear strategy.
Oil markets are coping without about half of Iran’s potential exports, but only because demand in Europe remains weak and the US is enjoying increased shale output.
The only thing that is clear is that this game is far from over.