Iran V: Sanctions
Competition
AHC
March 16
11
, 2012 Oil exports provided half of Iran’s government revenues, while crude oil and its derivatives accounted for nearly 80 percent of Iran’s total exports.” 35 The practical impact of Iran’s export potential must be kept in perspective. Iran at most has some 10% of the world’s proven oil reserves (137 billion barrels vs. 263 billion for Saudi Arabia, 211 billion for Venezuela, and 175 billion for Canada), and its percentage of potential reserves is substantially lower.36 Iran currently only produces 5.2% of world conventional oil liquids, and has been very slow to increase production. In contrast the Arab Gulf states have some 72% of the world’s conventional oil reserves and produce some 25% of world oil.37 Iran lacks total refinery capacity, and product export capacity, and its large, steadily growing population consumes a significantly larger part of its total production than is the case in the Arab Gulf states. Moreover, Iran has already tapped 75 percent of its known reserves, so the likelihood of new, major discoveries is low. Recently discovered sources have allowed Iran to hold oil production relatively steady, and they may even help production levels to grow somewhat in the immediate future, but new sources will not be able to offset natural declines beyond the short-term (see As a result, Iran will have to rely heavily on proven but undeveloped reserves, which will require major new investments.38 At the same time, the effectiveness of sanctions is partially dependent on the choices made by the importing nation. Figure V.3 also shows that some countries were far more dependent on Iranian exports than others at the time the US and EU imposed their new sanctions. This is a key reason why some of the new sanctions described later were tailored to give countries time to change their imports, and deal with either different refinery and product needs, or the end of preferential Iranian terms. At the same time, the same importing states have to carefully consider what happens if they do not comply. As the EIA noted in February 2010, 39 Iran’s oil exports also have been affected by sanctions. In 2011, Iran experienced significant problems with receiving payments from India for its exports, when the Reserve Bank of India halted a clearing mechanism due to sanctions. Some of the payments have been cleared through Turkish and UAE banks. More recently, NIOC announced that India has cleared all oil debts to Iran through Gazprombank of Russia and Iran has already received all overdue payments for its exports to India.
Iran also faces problems because it has very high domestic consumption of both domestic and imported petroleum products. Subsidized prices and a population that has doubled since the 1979 revolution created excessive demand. Natural gas accounts for half of Iran’s total domestic energy consumption, while the remaining half is predominately oil consumption.40 A significant portion of what Iran refines is low-value fuel oil, forcing them to rely on imports for higher value-added refined products, such as gasoline, jet fuel and diesel. These energy imports are EIA, DOE, Country analysis http://205.254.135.7/countries/cab.cfm?fips=IR
Briefs,
35
“Iran,”
February
17,
2012,
17,
2012,
36
BP, BP Statistical Review of World Energy, June 2011, bp.com/statisticalreview. pp. 6, 8 BP, BP Statistical Review of World Energy, June 2011, bp.com/statisticalreview. pp. 6, 8 38 Ibid 37
EIA, DOE, Country analysis http://205.254.135.7/countries/cab.cfm?fips=IR
Briefs,
39
40
Ibid
11
“Iran,”
February