As new Western sanctions apply increased pressure to Iran’s struggling economy, this week thee Financial Times unearthed an indirect consequence of the new sanctions: dropping oil exports. According to FT, Iran is increasingly struggling to find buyers, transports, and insurers for its oil exports, a major source of income for the regime.
While the United States has not imported oil from Iran since the Islamic Revolution in 1979, Iran is the wold’s fourth largest oil exporter, with major clients in Asia and Europe.
The new EU and US sanctions did not specifically target oil exports, but rather focused on the financial sector. However, the sanctions have severely tightened the credit available in Iran, and Iran’s growing public relations nightmares over recent human rights abuses have led to companies second guessing where they obtain their oil.
According to the International Energy Agency, Iran is likely to store excess oil in large ocean tankers while awaiting a buyer. According to some sources in Iran, this process has already started. While this is a very large added expense, the problem is compounded by the need to purchase insurance for the stored oil. This problem has been further complicated as Iran struggles to obtain foreign insurers willing or able to cover Iranian property. The credit crunch will magnify this problem, as the Islamic Republic attempts to insure these resources using Iranian money.
While more widespread sanctions, and sanctions against oil exports, were not politically possible at the time that these these new sanctions passed, the evidence is beginning to surface that targeting Iran’s part in the world financial machine will have a widespread effect on the Iranian economy.
Despite these problems, Mohsen Khojasteh Mehr, Iran’s deputy oil minister, has vowed to use Iranian resources (because the Islamic Republic cannot obtain credit) to further develop Iran’s untapped oil resources. However, if Iran’s exports fall, an increase in supply could possibly trigger an even greater rise in inflation, a constant anchor on Iran’s economic prosperity.
Certainly, these are not the only problems facing Iran’s economy. According to sources within the labor movement, rolling work strikes continue, and may intensify, as workloads increase and pay decreases.
Posted in Featured, Foreign Policy, Iran, Middle East
One Million Voices for Iran