Sunday, July 1, 2012

New Sanctions Go Into Effect – Is Iran Running Out of Options?

By Nader Uskowi

Effective today, the European Union has put in place a complete embargo of crude oil imports from Iran. The EU imported 20 percent of Iran’s total oil exports, or about 450,000 bpd. The EU also has banned its insurance companies to cover tankers that carry Iranian crude oil or petrochemical products.

Three days ago, foreign countries had to cut their oil imports from Iran by at least 20 percent every six months to receive temporary waivers from new U.S. sanctions that target banks for processing oil payments through the Central Bank of Iran. The U.S. reported on Thursday that 20 countries, including China, have complied.

Between the insurance ban and the 20 percent reduction in oil imports, it is estimated that Iran would lose some 550,000 bpd in oil sales. Added to EU embargo, the total loss in Iran’s oil exports come to approximately 1 million barrels a day.

In 2011, Iran exported some 2.2 million bpd with revenues of about $80 billion. The loss of 1 million bpd, or 45 percent of the country’s total exports would mean a loss of $40 billion a year. The falling oil prices could make matters worse, resulting in a net loss of more than $45 billion a year. For Iran, that’s huge.

The theory behind these new rounds of sanctions by the US and the EU is that Iran will change its behavior and will limit its nuclear program, because these sanctions are targeting oil, the lifeline of its economy, and are isolating its financial systems globally. Losses Iran cannot absorb for long.

So far the Iranians have not done anything to prove the theory! They will be selling oil, albeit at half the volume, but that’s still some $40 billion in revenues a year. The country also enjoys high foreign currency reserves, officially at $150 billion. The Iranian counter-theory is if they can survive long enough, the West, needing Iranian oil, will eventually give up and the sanctions regime will collapse.

But what if their theory proves wrong and the West could show a staying power beyond Iran's expectations. That question is also asked in Tehran and there are indications that the Iranians have taken these new rounds of sanctions seriously: they have participated in three rounds of talks with the major powers in the past three months, complaining loudly these days that the West is not taking the negotiations seriously, and finally requesting a meeting of technical experts that is now scheduled for next Tuesday.

Of course a peaceful settlement of the standoff between Iran and the West requires compromise on both sides. Iran has already proven to the world that it can enrich uranium at any level of purity and it is probably high time to work out a swap deal with the West on higher purity nuclear fuel. For a country that has repeatedly said it has no intentions to build the bomb, that’s really not a loss. But the continuation of the current situation is really a loss: the national currency on a free fall, the inflation getting out of control, the oil revenues cut in half with more to come, and the banking system becoming isolated globally.

Iran can in return demand a recognition of its rights to peaceful nuclear program, including the enrichment of uranium below the 5 percent threshold, and the lifting of sanctions. Those are real gains. Iran should take them and get back to normalcy. The country is running out of options.


Anonymous said...

no problem to rep.ace the european customer.خریداران-اروپایی-نفت-ایران-به-راحتی-جایگزین-می-شوند/اقتصادي/

even if the oil income is falling, it helps to establish non oil export industry

Anonymous said...

Those negotiations are complicated because Iran has to make concessions to Israel, Saudi Arabia, Europe and USA - to all of them; that's because the Islamic Zombies have so long refused to have a healthy relationship with the outside world ...

Anonymous said...

Anon 7:08 AM

"even if the oil income is falling,it helps to establish non oil export industry"

What "non oil export industry" when you have Chinese and Turkish imports destroying the domestic industry and laying off thousands of workers?

Anonymous said...

No. Your constant error is that you think Iranians with connections to the west (for family relations, for products, whatever) are the only Iranians.

All these sanctions do is marginalize the above group - which is exactly what the Mullahs want.

Anonymous said...

Anon 12:11 PM

Since when did you think that the mullahs are considered as Iranians?!
The regime has marginalized itself against the Iranian people and the world and that is all the mullahs own doing.
So don't put the blame on Iranians that have connections to the West.
Ridiculous statement.

Anonymous said...

Anno July 1, 2012 11:08 AM

The fasct is the iran today only 70% dependent from oil income, 30% is non oil.

Anonymous said...

Ok..So can we all agree Iran's going to collapse tomorrow?

Anonymous said...

Anno July 1, 2012 12:11 PM
well said, that is unfortunately problem of all exil iranian living in west

Anonymous said...

Anon 7:08 AM......Anything coming from IRNA or FARS is a load of old baloney!

Anonymous said...

Way to go, hope its worth it, for a nuclear bomb. Iran might as well resign from the NPT and rush to build a nuclear weapon as quickly as possible. They barely have anything left to loose.

Anonymous said...

I saw an article where a woman complained that she couldn't buy Nutella (like a nutty chocolate spread) anymore even though her children liked it. Being a foreign good its price has gone up a lot.

I guess she'll have to return to asal, moraba, butter (what is farsi for butter?) and other Iranian toppings. Disappointing to her - yes. A tragedy? No.

Anonymous said...

Anon 7:44 PM...Butter=Kareh
But you don't get the point.Bread is between 1300 and 3500 Toman.Meat is 45000 Toman and upwards.
Chicken has reached orbit passing even the Iranian space program etc etc...
Disappointing no,if you are the member of the regime in Iran.
A tragedy yes,because millions of people are struggling for basics in Iran.
And by the way that report is Press TV,should I say more?

Anonymous said...

Anon 3:36 PM

It's not 70 percent but 80 percent. Don't mention Press TV,it's a joke!

Anonymous said...

Anon 4:29 PM.....What have you against six million Iranians?

Remember this well.When the day comes those "exile Iranians" will go back to their country and help fix the MESS that those gangsters you support have created for our country.

Meanwhile sit comfortably in the West and be a good hypocrite.

Unknown said...

The cynic in me thinks that the regime sees a silver lining in the sanctions and the resultant Iranian people's stuffing. You all may remember every intellectual in the 1970s trying to instill the shah's ideology that iranians are to be kept poor in order to control them, I think this regime is following the same ideollogy.

On one hand the elites of the regime are not directly hurt by the sanctions, on the other hand, they may see improved surveivablily for the regime as a result of the average iranian fincicial struggles.

They in fact maybe right. It hard to imagine an average family risking a few months economic collapse and taking to the streets for an all out revolution.

I hate the thought, but I think sanctions will not bring this regime down. It will take extraordinary courage from the Iranian people to do so.

Anonymous said...

@Jabbar Faseli

"You all may remember every intellectual in the 1970s try to instill the shah's ideology that Iranians are to be kept poor in order to control them,"

No such thing. Monarchy is not an ideology like Islam or Communism.
Haven't you heard of the White Revolution to distribute wealth and land reform making the farmers land owners for the first time or Women's Rights protecting them from men who think they are gods gift to mankind?
Maybe you were quoting the saying:

"Keep the Arab stomach full,they will be happy."

"And keep the stomach of Iranians empty so that they won't have the time to demonstrate."

Unfortunately for people like you,the Shah did the exact opposite and tried to better the lives of the people at the same time he alienated the clergy because of the land reform and Women's rights and education.In those days the people were dumb enough to believe the clergy specially some charlatan like Khomeini when he said:Free bus rides.Free electricity and water.

Now for your second quote:"I think the regime is following the same ideology."

Yes the Islamic theocracy is following their principle Islamic ideology namely keeping the people poor and relying on handouts by the mullahs.By doing this it prevents members of society demonstrating against the theocracy because their handouts will be curtailed.
This is what Islamic religion does,keep the people poor and dumb.Women second class,basically divide the people in two and rule.

There is another saying:"Iranians are Namak Nashnas." And that is why Iran is in such a mess it is in today because of people like you.

Anonymous said...

So should we condemn the Iranian government? These sanctions are all political, no basis for them. And to ask Iran to cede its rights because of fear of is not a solution. Tomorrow they will come with new demands. Better suffer but next time USA and its poodles will think twice not only to wage a war against Iran but even to conteplate sanctions. Iran will come out of this even stronger.

Anonymous said...

As long as Iran is run by this brutal regime it will give excuses to others to destroy the nation.