US sanctions on Iran: The unfolding scenario

The reality of the renewed US sanctions on Iran is beginning to unfold as the clock ticks for the 180-day period during which the wind down of crude oil transactions with Iran would happen.

President Trump had earlier in May ended the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA), better known as the “Iran nuclear deal” that had lifted various sanctions on Iran.

Though other parties in the JCPOA, particularly the European Union and the United Nations, have not announced plans to join the United States in re-imposing sanctions on Iran, the first sign that the threat may be deterring buyers is the slight decline of Iran’s crude oil exports in May, according to estimates from Geneva-based Petro-Logistics, a leading tanker-tracking company.

Iran exported 2.6 million barrels per day (bpd) in April, a record since the lifting of international sanctions in January 2016. However, shipping data suggests the country’s crude exports have dropped to around 2.5 million bpd in May, a fall of about 100,000 bpd from April.

“Exports are down by more than 100,000 barrels per day (bpd) from the very high levels seen in April, but there is no sign of a mass exodus at this time,” Daniel Gerber, chief executive of Petro-Logistics, told Reuters.

Iran has turned to OPEC for succor. Bijan Zanganeh, Iran’s oil minister, wants a separate agenda at the next OPEC meeting, in Vienna on June 22-23, to discuss support for sanctions-hit Iran and outlined the case in a letter to Suhail al-Mazrouei, OPEC President and UAE Oil Minister.

Zanganeh noted that the agenda should be titled “support by the OPEC ministerial meeting of members who go under illegal, unilateral and extraterritorial sanctions.”

Thus far, the easing of curbs on outside investment in Iran’s oil and gas and petrochemicals sectors, had generated significant interest from multinationals.

GE will end sales of oil and natural gas equipment in Iran later this year. GE had received contracts from Iran for tens of millions of dollars for oil and gas equipment since 2017. For Iran, the withdrawal is a problem because the gear and equipment are crucial to maintaining and growing oil and gas production.

Total is also putting a hold on its South Pars phase 11 development. The French oil giant has spent a little under $100 million on South Pars so far out of a potential $2 billion budget for phase one of the project, which also involves China’s CNPC and Iranian company Petropars.

Two Indian banks have asked exporters to complete their financial transactions with Iran by August according to the country’s main exporters’ organisation and bank letters seen by Reuters. India and Iran have long-standing political and commercial ties, but New Delhi has been careful to not fall foul of US sanctions on Iran.

FRANK UZUEGBUNAM