Iranian regime officials from the Ministry of Oil assert that they continue to sell oil just as they did prior to the sanctions, and they receive payments in cash. Bloomberg recently reported a surprising surge in Iran’s oil exports, which reached 2.2 million barrels per day during the first 20 days of August, despite the ongoing US sanctions. These reports underline the fact that a significant portion of Iran’s oil finds its way to China, as most other countries still adhere to the imposed sanctions.
In this article, we delve into the intricacies of Iran’s oil exports to determine the accuracy of the stated figure of two million barrels per day.
Hamid Hosseini, the Chairman of the Board of Directors of the Union of Oil, Gas, and Petrochemical Products Exporters of the regime, raises doubts about this statistic. He emphasizes, “While there is indeed a demand in the oil market and oil prices have risen to $87, there remains skepticism about Iran’s capacity to export 2 million barrels of oil.”
He elaborates, “Our domestic oil consumption stands at 1.85 million barrels, with a sales capacity of 1.4 million barrels. Given the current technical conditions in the oil industry, it’s unlikely that the country can produce more than 3 million barrels. Moreover, when accounting for domestic consumption, the remaining available oil does not reach 2 million barrels. Considering the lack of investment in oil production, the claimed figure of over 2 million barrels appears unrealistic.”
Hosseini also sheds light on the upcoming year’s oil sales, stating, “The global economic climate is far from stable, causing concerns within the oil market. Reports from the Chinese market indicate unfavorable economic growth in the first six months of the year, with a projected growth rate below 5%. As a result, we cannot anticipate higher demand in the coming year.”
The price at which the regime sells oil remains an unanswered question due to the sanctions. Oil and energy analyst Simon Watkins suggests that China purchases Iranian oil at remarkable discounts. According to Watkins, China acquires Iranian oil at a 10% lower rate than Russian oil, and considering that Russia sells its oil 30% below the global average price, China enjoys a 42% discount on Iranian oil. China’s motivation lies in its understanding that limited international options remain for the Iranian regime, incentivizing them to negotiate more favorable terms for oil field development contracts.
However, the Iranian regime’s situation in oil sales to China has worsened. Starting from November 11, 2022, China began paying for oil purchases from Iran with yuan, restricting the usage of this currency within China for purchasing Chinese goods. This policy compels Iran to exchange oil for Chinese products.
An Iranian regime media outlet named Echo Iran highlights the ramifications of this decision on the Iranian populace: “During the first quarter of 2023, Iran’s oil exports to China increased. This is despite news indicating Iran’s willingness to provide substantial oil discounts to China, both to retain its share in the Chinese market and boost exports.”
A report by Kpler Institute reveals that while Russia offers oil to China at a $9 discount, the Iranian regime is providing a discount ranging from $12 to $15 per barrel. Based on these calculations, if Iran maintains its trend of exporting 930,000 barrels of oil daily to China as observed in the first three months of 2023, this translates to discounts amounting to at least $670 million and potentially up to $837 million in just two months. It becomes apparent that the regime resorts to significant oil discounts to secure its position in the Chinese oil market, increase exports, and accrue foreign currency.
The regime’s motive for selling oil at substantial discounts becomes evident in light of its decimated manufacturing and agricultural industries. With oil remaining the sole source of income, the regime’s survival hinges on extracting and giving away Iran’s oil. Moreover, the regime’s efforts to evade sanctions lead to intricate smuggling operations, involving the transfer of oil from one tanker to another or between various ports, incurring substantial costs and diminishing overall oil revenue.
The regime’s claims of high oil exports serve a dual purpose: first, to propagate its falsehoods and portray a situation under control; and second, to secure the necessary currency for its continued activities, despite the hardships it inflicts on its own people.
Contrary to the regime’s assertions, the funds obtained from oil sales have had little impact on improving the living conditions of the Iranian people. Escalating prices persist, prompting questions even within the regime’s factions regarding the use of the purported funds. The situation is so dire that even the so-called reformist faction mocks President Ebrahim Raisi, highlighting the dissonance between television statistics and the contents of people’s refrigerators.
A portion of these funds finds its way to missile factories, another portion is channeled to regime-affiliated militias abroad, and yet another portion is seized by government mafias. The reality remains that the Iranian people have yet to experience the benefits of these supposed gains.