Iran oil exports hit 6-year high as west prepares sanctions

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Iran is exporting more oil than at any time for the past six years, giving its economy a $35bn-a-year boost even as western countries discuss stepping up sanctions in response to its attack on Israel.

Tehran sold an average of 1.56mn barrels a day during the first three months of the year, almost all of it to China and its highest level since the third quarter of 2018, according to data company Vortexa.

Iran’s success in exporting its crude underscores the difficulties facing the US and the EU as they seek to build up pressure on Tehran following its missile and drone attack on Israel.

“The Iranians have mastered the art of sanctions circumvention,” said Fernando Ferreira, head of geopolitical risk service at the Rapidan Energy Group in the US. “If the Biden administration is really going to have an impact, it has to shift the focus to China.”

Washington and the EU are preparing new sanctions on the Islamic republic, in part to dissuade Israel from escalating the conflict with Tehran by retaliating. US Treasury secretary Janet Yellen admitted this week that Iran “clearly” continued to export its oil and that there was “more to do” to curb the trade.

But analysts say that Washington is disinclined to strictly enforce the “maximum pressure” sanctions regime introduced in 2018 by then-president Donald Trump, citing a reluctance by President Joe Biden’s administration to introduce an inflationary choke on global oil supply in a US election year.

In Tehran, the state Tasnim news agency said on Wednesday that the country’s oil industry had found ways to get around sanctions, adding that, since its main customer was China, it was largely shielded from western pressure.

Israeli forces shot down the barrage of about 300 missiles and drones launched by Iran over the weekend. But the attack — the first time Tehran has targeted the Jewish state directly — has intensified fears that the region is sliding towards a broader conflict, as Israel weighs how to respond.

Iran launched the attack in retaliation for a suspected Israeli strike on its Damascus consulate that killed several senior Iranian commanders.

The mounting tensions since the October 7 Hamas attack on Israel have helped drive oil prices more than 15 per cent higher this year to about $90 a barrel. But prices fell back in the wake of the Iranian attack, as traders bet that supplies from the region would not be disrupted. Brent crude, the international benchmark, fell 3 per cent to $87.37 a barrel on Wednesday.

Armen Azizian, a senior analyst and sanctions specialist at Vortexa, said the US had recently begun to target individual tankers suspected of carrying Iranian crude, sanctioning two in February and another 13 in April. But the impact on exports so far, he said, had been “minimal”.

“The Iranians are very good at finding loopholes,” he said. “Now they spoof the AIS [the ship tracking system], pretending to be in one location when they are in another one, and that makes it hard to track what they are doing,” he added. 

Column chart of Number of vessels by tanker class showing The number of tankers carrying Iranian crude has increased

Azizian said the size of the fleet used by Iran to transport oil has grown by a fifth in the past year to 253 vessels, and that the number of supertankers carrying up to 2mn barrels of oil has doubled since 2021.

Virtually all Iranian oil sold this year has gone to China, according to Kpler, which tracks tankers around the world, and aggressively enforcing sanctions could destabilise not only the oil market but also the US-China relationship.

China relies on Iran for around a tenth of its oil imports, but processes the oil not through its state-owned oil and gas companies but through smaller, private, refineries.

Iran’s oil minister Javad Owji said last month that oil exports had “generated more than $35bn” in the preceding year. On another occasion, he said that while Iran’s enemies wanted to stop its exports, “today, we can export oil anywhere we want, and with minimal discounts”.

Soaring shale oil output over the past decade has made the US the world’s biggest producer, and freed Washington to be more aggressive with sanctions on other crude exporters. On Wednesday, it reimposed sanctions on Venezuela, another member of the Opec cartel.

The Biden administration has also been willing to release crude oil from its strategic stockpile, and has indicated that it could do so again if global prices move higher and push up domestic petrol costs.

However, there is growing Republican pressure on the White House to take action against Iran’s oil sales, along with criticism on the administration for soft-pedalling on existing measures.

“The question for the Biden administration is whether they have any incentive to utilise the sanctions architecture that the Trump administration used to take down Iran exports by 1mn b/d,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.

Via

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