Abu Dhabi: Iran’s oil exports are expected to decline by 30 to 40 per cent once US-led sanctions on oil exports kick in from November, analysts told Gulf News.
Iran, which is one of the important members of the Opec (Organisation of the Petroleum Exporting Countries) produces about 3.8 million barrels of oil per day, of which it exports about 2.8 million barrels of oil per day to various countries including China, India and a number of countries in Europe.
“At least 30 to 40 per cent of oil exports are going to be immediately impacted just by virtue of the US clearing system. We clear so much transactions through the US and any oil that is purchased anywhere in the world is cleared through dollar transactions will be impacted,” Jaafar Al Taie, managing director of UAE based Manaar Energy Group told Gulf News over phone.
China, India and countries from Southern Europe are the biggest importers of Iranian oil, he said.
“Certain countries importing oil from Iran will not be willing to cut imports especially China which is the big importer and has a tariff issue with the US and it will be reluctant to reduce its imports.”
“India, on the other hand seems to be playing according to the US policies and wants better relations with the US. India is the number two importer and it is uncertain whether it will import or not.”
“Europe is uncertain too, especially Italy and Spain, on how much will they reduce imports from Iran. For Spain, it’s a big problem as its economy is dependent on Iranian oil. So for these reasons, Southern Europe is little bit uncertain.”
He also added that Iran itself can undertake some disruptive measures and can simply reduce oil production to raise the price of oil in international markets.
“If it does, then it will disrupt Trump’s and Opec’s programme to see lower oil prices. Iran’s decision can be politically motivated, so their desire to harm Trump is greater than to do the right thing commercially.”
“So far Iranian oil minister seems to be thinking rationally, but this is something we should keep an eye on in the coming days.”
Echoing similar comments, Dr Sara Vakhshouri, president of SVB Energy International based in Washington DC said oil exports from Iran have already reduced by about 550,000 to 600,000 barrels per day in August when the first round of US sanctions kicked in.
“The figure is likely to go up to 1.4 to 1.5 million barrels per day this month,” she added.
“There is a general misunderstanding that Iran’s oil exports will start showing a significant reduction from November 4 onward, but the first round of sanctions will put severe limitation on transactions with Iran and insurance on oil tankers.”
Last month, the US administration reimposed the first batch of Iran sanctions since Washington withdrew from the 2015 nuclear deal, with sanctions on oil sales coming into force from November.
“Reductions in Iranian oil exports will have a negative impact on Iran’s economy and currency value which ultimately causes a massive inflation in the country.”