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Dramatic Drop of Oil Price and the Iranian Regime’s Challenges

The dramatic drop in oil prices pushed the Iranian regime into a tiny corner they had never been experienced before

History has shown many times that oil-dependent economy governments have challenged the global oil market by reducing or increasing production to meet their own interests. However, an uninvited guest has stepped into the arena and challenged all the previous actors.

The new actor was invisible; however, its influence was greater than any superpower or giant oil-producing company the world has ever seen. In fact, the novel coronavirus played a key role in the oil price game while it managed to drop oil prices in the United States by 300 percent in three days.

On Monday, April 19, in an unprecedented phenomenon in the world oil industry, the price of U.S. oil for delivery in May fell by 300 percent in comparison to Friday and at some point, it reached a negative $60.

Truly, the fate of petroleum-based economies is horrible when the world’s superpower was crippled to control the consequences of this economic crisis. For instance, several Russian officials have predicted that the 2020 budget will run at a deficit of 5.6 trillion rubles, or about $75 billion. They believe that much of Russia’s budget deficit will be due to falling oil prices.

In such circumstances, the state of Iran needs no explanation. The mullahs squandered national resources on adventurism such as costly nuclear bomb-making projects, the production of ballistic missiles, and ominous meddling in neighboring countries’ affairs. These aggressive policies raised the international community to cut off their revenues by an oil embargo to help the global peace since several months ago, even before the emergence of the COVID-19 infectious disease.

The plunge the oil prices below zero means that producers not only do not receive money from customers in exchange for oil deliveries, but they also pay customers to carry the extracted petrol. Given the oil storage facilities are being filled and the surplus oil produced is neither sold nor stored, the maintenance petroleum has become a headache for the producers.

In this respect, the Organization of the Petroleum Exporting Countries (OPEC) and Russia’s allies recently agreed to cut their daily production to 9.7 million barrels per day in May and June. The United States, Norway, Canada, and other oil-producing countries have also pledged to cut production by 3.7 million barrels per day. Furthermore, the world’s 20 largest economies (G20 group) have also assured to buy and store 200 million barrels of oil in two months.

However, dropping oil prices have now raised further economic concerns for oil-dependent governments, including Russia, Saudi Arabia, Iran, and Venezuela.

Earlier, the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), opened an economic, political breathing space for the mullahs. Moreover, they siphoned the JCPOA’s economic privileges in advancing their ballistic missile projects and malign behaviors in the Middle East.

The regime’s supreme leader Ali Khamenei spent near $100 billion of the released assets in addition to the Iranian people’s national wealth on his dreams of establishing a religious empire. The regime funded Bashar al-Assad in Damascus by $15-16 billion per year. According to the U.S. coordinator for counterterrorism Nathan Sales, the mullahs previously paid $700 million to the Lebanese Hezbollah every year.

“We are openly admitting and being transparent and honest to the entire world that Hezbollah’s budget, salaries, expenses, food, water, weapons, and missiles come directly from the Islamic Republic of Iran, Hezbollah’s secretary-general Hassan Nasrallah said in June 2016.

However, it is unlikely that the world turns a blind eye to the Iranian regime’s previous adventures. This matter has concerned Iranian officials. “Iran will close the Strait of Hormuz if it cannot sell its oil,” the regime’s President Hassan Rouhani said in July 2018. “Peace with Iran is the Mother Peace and war with Iran is the mother of wars,” Rouhani claimed.

These days, given the expansion of the coronavirus pandemic and the reduction in proposals for oil, the country’s oil revenues have dramatically decreased. Iran’s income faced a deficit of more than 50 percent, it has reached $5.3 billion between March 20 to April 20 alone. In such circumstances, closing the Strait of Hormuz seems impossible more than ever!

Furthermore, the Iranian regime’s daily oil exports had previously been affected by U.S. sanctions. With a sharp decline in Iran’s crude oil export, the country had sold about 200,000 barrels per day. Notably, the Rouhani administration had closed the 2020-2021 budget bills on the $45-per-barrel oil sales. However, the mullahs were offering the country’s oil and condensates to their “strategic allies” far lesser than this price.

Read More:

Iran’s 2020–21 Budget Is a Genuine Dilemma


Under these circumstances, authorities try to control their bankrupt economy and compensate for the country’s budget deficit by printing more banknotes. Observers believe that printing money without viable support leads the country to more inflation and high prices. They say that Iranian citizens will meet a 100-percent growth in inflation and a severe rise in prices in an upcoming couple of months.

Meanwhile, the Iranian people have not benefited from oil sales and will not under the rule of the mullahs and the IRGC. “Oil is obligatory for the country. However, only rent-seekers benefit from its privileges instead of the people and employees,” the state-run Aftab-e Yazd daily wrote on April 20.

All these facts show the society’s economic readiness for pouring into the streets like November and January, which has raised severe concerns among Iran’s rulers and their allies.

“This time the protests will be more intense and violent. It can be described as a super-protest movement while it would be accompanied by the participation of impoverished segments and mid-classes of the society,” the state-run Jahan-e Sanat wrote on April 22.

Also, on April 21, former IRGC Commander Mohammad Ali Jafari sounded the alarms about the potential of social protests and highlighted the necessity for the regime’s oppressive measures.

“We must take these drills very seriously and use them to gain experience because there are dangerous coronaviruses in our society that we cannot sense. It is our obligation to use this capacity,” the IRGC-affiliated Fars news agency quoted Jafari as saying on the same day.


Read More:

Iran’s Regime: Coronavirus Quarantine an Impossible Option for the Economy

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