Iran prepares for sanctions

29/10/18 14:01 Filed in: iran | sanctions | oil | economics

AX INTEL BULLETIN: Iran prepares for sanctions
DATE: 29OCT2020

On 28OCT, for the first time in its history, Iran sold some of its crude oil via an energy exchange house. This new approach of selling to anonymous private customers is part of Tehran’s efforts to evade US sanctions on Iranian oil, which are set to be imposed from Nov. 4. Whether it will be that much harder for Washington to identify and penalize private customers—as opposed to big national oil importers—remains to be seen.

Meanwhile, a few realities are crystal-clear. Despite such measures, Tehran’s oil exports will continue to suffer, not least due to the discounts it has to offer to entice customers. The nature of such anonymous transactions is also inherently corrupting. During the last round of sanctions on Iranian oil, the use of informal middlemen led to a number of major multibillion-dollar corruption scandals such as those involving Babak Zanjani and Reza Zarrab.

Turning to the private sector to sell some of its oil also points to another reality: Tehran has no intention to readjust any of its foreign policies or negotiate with the Trump administration. Instead, it wants to buckle down and wait out the Trump presidency, whether it ends in 2021 or 2025. Aside from looking for ways to evade sanctions, the Iranian energy sector is today devoid of strategic ideas about how to retain the country’s once major role as an energy powerhouse.

In the short term, with the economy in bad shape, oil revenue is key. Officials in Tehran say the country can stay afloat by selling 1 million barrels of oil a day (compared to the pre-sanctions figure of 2.5 million barrels per day) at a price of around $75 per barrel. This might be the case but it still amounts to Iran withering as an energy power.

Tags: iran, sanctions, oil, economics