Iran is likely to become more brazen over hydrocarbon exports in future, a US-based energy expert has told Seatrade Maritime News.
“Iran is an integral part of China’s Belt and Road
Initiative. China has spent billions of dollars on its relationship with Iran
and is positioning itself to spend billions more. This relationship is for the
long term, covering the security, defense, and energy sectors. Iran is able to
mitigate the effect of sanctions, and China can further its geopolitical
ambitions to transform from a regional to global power,” Justin Dargin, an
analyst at Oxford University, said.
The increase in Iranian exports can be perceived as the
Iranian government assessing the Biden administration’s resolve to
intervene forcefully, Dargin believes. A focus on bringing Iran back to the
negotiating table, domestic concerns over Covid and inflation, and the United States
and European Union efforts to restrain Russia, have encouraged Iran to pursue
its sanctions-busting activity without fear of repercussions.
“Also, while Obama initiated the American ‘retreat’ from the
Middle East to implement the Asian pivot, Trump exacerbated the perception of
American isolationism.
The
White House’s chaotic withdrawal from Afghanistan fed the perception that the
US’s Middle East policy lacks any coherence. It is the perfect vacuum for China
to enlarge its relationship with Iran. The Biden Administration has not
attempted to punish to any appreciable degree the sanctions-evading activity,”
he said.
“In light of these factors, it is likely that Iran will
continue to engage and even expand its oil exports beneath the radar. It could
become even more brazen in the process as Iran’s customers disregard the threat
of an American response while the US is entangled in the European theatre.”
The
Wall Street Journal said Iran's oil exports, largely China-bound, rose to
870,000 barrels a day in the first three months of the year, up 30% from an
average of 668,000 barrels a day in full-year 2021.
Iran also anticipates that sanctions will be lifted soon as
the world seeks additional oil supplies to mitigate Russian sanctions, amid
supply shortfalls and volatility, Dargin said.
The
National Iranian Tanker Company (NITC) recently announced that it will
construct new crude tankers while it sends about 24 aging ships to be repaired
in a bid to return to the global market.
“This shows that Iran is readying itself to begin exports in
short order. Several NITC tankers have even begun transiting international
waters with their Automatic Identification Systems (AIS) turned on in highly
visible trade with Iran’s Asian customers,” he said.
“Iran does have one of the largest tanker fleets globally,
with an approximate total deadweight of 15.5 million tons. Still, it will take
enormous modernization—inspection, testing, certification, and renovating and
refurbishing—to restore the fleet to transit international waters in an
appreciable capacity. But, with the windfall profits Iran has, it will not be
economically hurting as it was several years ago.”
When the Trump administration reimposed sanctions to further
isolate Iran under its ‘maximum pressure’ framework, Iranian production dropped
precipitously after 2018, but has since rebounded to pre-sanctions levels of
approximately 3.8 million barrels per day (mbpd) in anticipation that sanctions
will be lifted at some point in the near future.
“However, while Biden entered office hoping that the nuclear
deal could be revived, expectancy has fallen due to the stark rise in oil
prices and increases in exports to Iran’s main allies, both of which reduced
the internal and external pressure on Iran to compromise,” he said.
In the wake of the Russian invasion and the need for more
global oil supply, there is little appetite to place additional pressure on
Iran. Most of Iran’s oil heads to China, and China is buying more oil now than
before the sanctions. India was purchasing Iranian oil but ceased in mid-2019
to comply with American sanctions, Dargin said.
“However,
India is ready to buy Iranian crude once sanctions are lifted as its refiners
have begun prepping. The Indian government has created a contractual template
to swiftly reenter negotiations once Iranian oil is somewhat sanitized. This is
also the trend with Iran’s other major Asian customers, such as South Korea,
constructing the groundwork with working talks for importing Iranian crude,
which is reasonably priced and simple to process compared to other grades,” he
said.
The White House believes that China tranships Iranian crude
to North Korea. Syria, Lebanon, and Iraq are other regional customers, while
Malaysia and other countries serve as transhipment points to relabel the oil.
Companies from several countries, some in Southern Africa, are being
investigated for facilitating illicit Iranian oil trade, Dargin said.
“To sum up, it appears that Iran is becoming quite brazen
with its oil exports, even with the hope of a speedy ‘legal’ return to the
global market somewhat in tatters at the moment. Iranian ships have begun to
turn on their AIS and China is importing ever-higher amounts of Iranian crude,”
he said.
“Further, Iran is banking on the fact that the US and Europe
are distracted by the European theater to take much notice or express concern
about its activities. It seems that the global community will also, if not
facilitate, then turn a blind eye to, Iranian shipments, if this relieves the
pressure on the global oil market in the prelude to a continental-wide Russian
oil ban.”
