Iran Displacement By Iraq As World’s Second-Largest Oil Exporter Occasions Western Fist-pumping

By: Frank Quin
Frank Quin
Frank is a native New Zealander with a wealth of experience. A lawyer by background Frank was commercial law… read more.
on Aug 10, 2012

Sanctions against Iran are nothing new – since the United States started the ball rolling in 1979, a wide range of countries and international bodies have gotten in on the game. It’s that kind of country, is the Islamic Republic of Iran. Hardline, aggressive, and of course a nuclear weapons aspirant.

And still functioning, despite the growth in sanctions especially over the past five or so years, since the United Nations – very much with American urging – imposed its first in 2006. The UN’s focus is exclusively on nuclear but other sanctions target the broader Iranian economy and especially its key sector – energy.
And there are signs that the combined force of these international sanctions is really biting, at both government and individual citizen levels. In its latest Oil Market Report, dated 10 August, the International Energy Agency – set up back in the 1970s as a way for wealthy oil-consuming countries to handle supply-side problems (like sudden regime-change in major producing countries) – asserts that Iran has just been displaced from its long-time position as the world’s second-largest oil exporter. In July’s OMR, Iranian production for the month of June was put at 3.2 million barrels per day, with Iraq at 2.91mb/d. But in July, according to the IEA, Iran was back to 2.9 and Iraq pumped just over 3 million barrels daily.

!m[](/uploads/story/239/thumbs/pic1_inline.png)The reversal might be explained by a number of factors but this ascendancy of a war-ravaged Iraq to a position lost to Iran during their nasty decade-long conflict in the 1980s has occasioned some fist-pumping in Washington and other points west. American pride has yet to make a full recovery from the 1979 revolution which overthrew the Shah – a highly-valued Cold War asset – and held to ransom for over a year the entire US diplomatic corps in Tehran.

In particular, the fall-off in Iranian oil exports is seen as evidence of a new level of efficacy in what had hitherto been primarily an American effort, with the European Union embargo on Iranian oil – and pretty much everything else – imposed at the beginning of the year kicking in from the beginning of July. A handful of EU states had already turned their backs on the Islamic Republic in support of the UN/US sanctions – notably Britain and France – but the EU-wide embargo is seemingly making an immediate impression.

The intent – and hope – is that with the EU now fully engaged in hitting Iran where it hurts, the regime there will finally accept that achievement of its nuclear ambitions is going to cost too much. Having its nuclear scientists sniped by guided bomb from Israel is one thing, but the loss of billions of dollars in projected oil exports each year is of an entirely different order. By all accounts, the ordinary people of Iran are suffering and the incumbent regime must be wondering when and how that hurt will manifest itself.

Yet, it – the regime – keeps trying to manage, and where possible deflect, the sanctions. On 8 August, the Financial Times reported that South Korea has resumed the purchase of Iranian oil. The aforementioned EU sanctions forced a number of countries to quit buying oil from Iran because of a withdrawal of EU-sourced tanker insurance. But Tehran has found the wherewithal to come up with its own tankers and its own insurance, seemingly of sufficient integrity to satisfy South Korea.
Given that it’s the Islamic Republic’s fourth-largest customer, South Korea’s renewed custom will provide some relief from the EU embargo. It also shows that not everyone backs Iran’s isolation from world trade.

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