As Iran began enriching uranium to 60% at a second site last week, its chief nuclear negotiator Ali Bagheri-Kani was in India to talk economics.
Energy, which features increasingly in diplomatic or “political” discussions as the December 5 deadline for an international price cap on Russian oil draws near, was one of the Iranian vice minister’s priorities. Foreign Affairs. Proposed by the The United States via the G7this will bar European and UK services, including insurance and tankers, to any global buyer of Moscow crude paying above the cap.
Indian politicians are aware that their country has grown Russian oil imports this year at around 750,000 barrels per day (bpd). New Delhi is unlikely to resume Iranian oil imports, which it halted in 2019 over fears of ‘maximum pressure’ US sanctions after Washington in 2018 quit the Iran nuclear deal, the JCPOA (Joint Comprehensive Plan of Action). In 2017-18, India took 10% of its oil imports from Iran.
India, which abstained on November 17 International Atomic Energy Agency (IAEA) vote censure of Iran for its nuclear program, is among the countries of the “global south” worried about American and European measures against Russia’s disruption of energy and food supplies. As Europe cuts ties with Moscow, Pakistan, another abstainer at the IAEA, is in talks with Moscow over buying oil with late payments.
Certainly, Indian officials know that the price cap is unlikely to stifle their supply. Discussions centered on its fixing at $65-70 a barrel. The ceiling is expected to be higher than the price at which Russia is currently selling, with a benchmark Urals at $52 a barrel on Thursday, Argus Media reported. The cap would therefore only stem the flow in the event of a rise in oil prices.
Despite everything, the Russian economy is reeling from the consequences of the war in Ukraine. By December 5, the EU itself will stop transporting Russian oil by sea. Russia’s exports to Europe – by sea and pipeline – have already fallen from 3.5 million to 1.5 million bpd, and its GDP, according to the International Monetary Fund, will drop 3.5% this year. According to official figures, $14.7 billion was withdrawn from the Russian banking system in October as anxiety mounted.
A Russian armored column destroyed in Ukraine in March 2022
Moscow’s efforts to make up for lost oil exports to Europe by boosting sales to Beijing have been hampered by the sluggish state of a Chinese economy under Covid restrictions. Chinese buyers also benefited from a discount offered by Rapidan Energy Group at around $15 a barrel.
This affected Iran’s own sales to China. As Iranian exports have become increasingly opaque in order to hide them from US eyes, Tehran’s oil sales of 500,000 to 1 million barrels per day (bpd), going almost entirely to China, were undermined by Russia.
Given the growing lack of transparency, Iranian ministers have issued vague but generally upbeat statements, often lumping together crude oil, gas condensates, petrochemicals and petrochemicals.
Intermediaries, barter, uncertain prospects
Iran’s revenue figures are still muddied by payments to middlemen and barter, as has been pointed out recently by Fararu. The private website deemed it “unlikely that the Iranian government has succeeded in increasing its export volume” and chastised Oil Minister Jawad Owji for apparently suggesting that exports were somehow higher than 2.8 million. bpd before US “peak pressure”.
Fararu noted that “several experts” had argued that Iran’s budget for the year beginning March 2023 should assume an oil price of $40 to $50 a barrel on sales of 600,000 bpd. This compares to $70 figure underlying Budget 2022-3and brands another sign that the Iranian media and analysts assume that the talks to revive the JCPOA come to nothing and that the American sanctions will therefore remain at least in the medium term.
Iranian President Ebrahim Raisi trumpeted success by surviving maximum pressure in faced with the depletion of foreign revenues. The economy’s hesitant recovery from two years of recession to weak economic growth 2020-22 has been based on a national industry benefiting from the fall of the rial and reduced foreign competition in the domestic market.
But concerns in Iran do not just reflect the JCPOA’s diminishing prospects and internal instability heightened by the current protests. Iran still needs foreign revenue to pay for its imports and rally the rial. The evolution of geopolitics and energy supply with the Ukrainian crisis, as well as the rise of the dollar, aligns Iran not so much with energy exporters as with with so much Africa and poor countries in the Middle East facing rising inflation and uncertainty.