By Lucy Adautin
Iran’s economy has received a significant $35 billion annual boost from its highest oil exports in six years, averaging 1.56 million barrels per day in the first quarter, as discussions about increasing sanctions persist among western nations following Iran’s attack on Israel.
In the first quarter of the year, Tehran sold an average of 1.56 million barrels per day, primarily to China, marking its highest level of exports since the third quarter of 2018, as reported by data company Vortexa.
Iran’s effective crude oil exports serve as a reminder of the challenges the US and the EU face in their efforts to increase pressure on Tehran after its missile and drone strike 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.
The state Tasnim news agency in Tehran reported that Iran’s oil industry has devised strategies to circumvent sanctions, noting that as its primary customer is China, it is largely insulated from Western pressure.
Israeli forces intercepted approximately 300 missiles and drones launched by Iran over the weekend, marking Tehran’s first direct targeting of the Jewish state. The attack has heightened concerns of escalating tensions in the region, with fears of a broader conflict looming. Iran initiated the attack in response to a suspected Israeli strike on its Damascus consulate, resulting in the deaths of 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.
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”.
The surge in shale oil production has positioned the US as the largest global producer, enabling Washington to adopt a more assertive stance with sanctions on other oil exporters. Recently, the US reimposed sanctions on Venezuela, a fellow member of the OPEC cartel.
Additionally, the Biden administration has shown a willingness to release crude oil from its strategic reserve, with indications of further releases if global prices rise and impact domestic fuel costs.
Republican pressure is mounting on the White House to address Iran’s oil sales, with criticism directed at the administration for perceived leniency on existing measures.
Helima Croft, global head of commodity strategy at RBC Capital Markets, questions whether the Biden administration has the incentive to utilize the sanctions framework employed by the Trump administration to significantly reduce Iran’s oil exports by 1 million barrels per day.
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