When Iran began running a covert nuclear program, the Western world reacted with caution.
Requests for details and restrictions on the program were met with refusal, as the Middle Eastern nation continued to enrich uranium for what it said was a nuclear power reactor.
But the speed at which the nation was enriching its uranium put many on edge, sparking strict U.S. sanctions on Iranian oil. The European Union followed closely behind with its own tightening sanctions.
Asian nations like China were even required to cut purchases in order to get around the U.S. sanctions. For the first eleven months of 2012, China’s imports of Iranian crude were down 20 percent.
The oil industry is the lifeblood of the Iranian economy. Once OPEC’s second biggest producer only to Saudi Arabia, Iran has now slipped below Iraq, Venezuela, and Kuwait to fifth place.
Oil exports were at 2.4 million barrels per day (mbpd) at the end of 2011. Now, they’re at just 1.0 mbpd.
And while last year 60 percent of the budget came from $100 billion in oil export revenue, this year those funds will be severely lacking.
Other Iranian lawmakers have previously admitted that the sanctions were hurting both exports and revenue, but Oil Minister Rostam Qasemi has denied such claims – until now.
From Business Insider:
“There has been a 40 percent decrease in oil sales and a 45 percent decrease in repatriating oil money,” Qasemi told the Iranian parliament’s budget commission, according to the ISNA news agency citing MPs.
It seems the hit has finally reached a high enough level for the Oil Minister himself to admit the nation’s economy is hurting.
December’s total production level was down 40,000 barrels a day from the previous month to 2.66 mbpd. Exports are expected to close the year – which ends March 20 – around 1.0 mbpd.
Mr. Qasemi estimates that exports will rise again in the new Iranian year. He believes sales will move up again to 1.5 mpbd.
But Western sanctions are still held tight, and more cuts in imports are rolling in. Japanese refiner JX Nippon Oil & Energy announced it would cut Iranian oil imports “slightly,” a response to sanctions, Platts reports.
JX Nippon’s contract for 10,000 barrels per day expired in March 2012, though it’s been allowed to keep it pending for renewal. But another contract for 80,000 bpd expired at the end of December.
Total Japanese imports from Iran were 188,000 bpd from January to November 2012, a decrease of 40% from a year prior.
If JX Nippon is the first company to bring this down even more, it likely won’t be the last. Other Japanese oil companies have contracts that won’t expire until March – the end of the Iranian year. The fate of their contracts will be determined then. And if the sanctions have forced JX Nippon’s hand, it will likely force theirs, too.
The U.S. sanctions have placed such a burden on the Iranian economy that the government has shown sudden interest in opening negotiations on its nuclear program.
A European Union spokesman has indicated the talks could occur “very soon,” while the president of Iran’s Supreme National Security Council, Saeed Jalili, has said they could open in January, the Washington Post reports.
After all, the sanctions gave them little choice.
That’s all for now,
Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.