Iranian oil exports hit 6-year high as West prepares sanctions

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Iranian oil exports hit 6-year high as West prepares sanctions

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Iran exports more oil than at any time in the past six years, giving its economy a $35 billion-a-year boost, even as Western countries discuss strengthening sanctions in response to his attack on Israel.

Tehran sold an average of 1.56 million barrels per day in the first three months of the year, almost all of it to China, its highest level since the third quarter of 2018, according to data firm Vortexa.

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

“The Iranians have mastered the art of sanctions evasion,” said Fernando Ferreira, head of geopolitical risks at Rapidan Energy Group in the United States. “If the Biden administration really wants to make an impact, it needs to focus on China. »

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

But analysts say Washington is not inclined to strictly enforce the “maximum pressure” sanctions regime introduced in 2018 by then-President Donald Trump, citing the reluctance of President Joe Biden’s administration to introduce an inflationary stranglehold on global oil supplies during a US election year.

In Tehran, the official Tasnim news agency said Wednesday that the country’s oil industry had found a way to circumvent sanctions, adding that its main customer being China, it was largely shielded from Western pressure.

Israeli forces shot down around 300 missiles and drones launched by Iran over the weekend. But the attack – the first time Tehran has directly targeted the Jewish state – has intensified fears that the region is sliding into wider conflict, as Israel considers how to respond.

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

Growing tensions since Hamas’ attack on Israel on October 7 have helped push oil prices up more than 15 percent this year, to around $90 a barrel. But prices fell following the Iranian attack, with traders betting that supplies from the region would not be disrupted. Brent crude, the international benchmark, fell 3 percent to $87.37 a barrel on Wednesday.

Armen Azizian, senior analyst and sanctions specialist at Vortexa, said the United States recently began targeting tankers suspected of carrying Iranian crude, sanctioning two in February and 13 more in April. But so far the impact on exports, he said, has been “minimal”.

“The Iranians are very good at finding loopholes,” he said. “Now they are usurping the AIS [the ship tracking system]pretending to be in one place when they are in another, making it difficult to track what they are doing,” he added.

Column chart of number of ships by tanker class showing that the number of tankers carrying Iranian crude has increased

Azizian said the size of the fleet used by Iran to transport oil has increased by a fifth over the past year, to 253 ships, and the number of supertankers carrying up to 2 million barrels of oil has doubled since 2021.

Virtually all Iranian oil sold this year has gone to China, according to Kpler, which tracks oil tankers around the world, and aggressive enforcement of sanctions could destabilize not only the oil market but also relations between the United States and China.

China depends on Iran for about a tenth of its oil imports, but processes it 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 $35 billion” the previous year. On another occasion, he said that even if Iran’s enemies wanted to stop its exports, “today we can export oil wherever we want, and with minimal discounts.”

Skyrocketing shale oil production over the past decade has made the United States the world’s largest producer and allowed Washington to be more aggressive in imposing sanctions on other crude exporters. On Wednesday, it reimposed sanctions against Venezuela, another member of the OPEC cartel.

The Biden administration has also shown a willingness to release crude oil from its strategic stockpiles, and indicated it might do so again if global prices rise and drive up domestic oil costs.

However, there is growing pressure from Republicans on the White House to take action against Iranian oil sales, as well as criticism of the administration for watering down existing measures.

“The question for the Biden administration is whether it has an incentive to use the sanctions architecture that the Trump administration used to cut Iranian exports by a million bpd,” said Helima Croft, an official global commodities strategy at RBC Capital Markets.

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