Is Iran on a Path to Exceeding Oil Export Limits?

Under the Joint Plan of Action (JPOA) proposed by the P5+1, between January 20 and July 20, 2014, Iran is granted $7 billion in sanctions relief, which includes easing restrictions on oil exports. As it has been widely reported, Iran has taken advantage of this window, initiating a flurry of business opportunities. What has not been reported is that by mid-May, Iran may reach the allowed limits on crude oil exports.

According to the State Department website, the JPOA sanctions relief “pauses efforts to further reduce Iran’s crude oil exports, enabling the current importers of Iranian crude oil – China, Japan, South Korea, India, Turkey, and Taiwan – to maintain purchases at current average levels during the JPOA period.” A senior State Department official explained during a background brief that the U.S. plans to monitor Iran’s exports, to “look at the aggregate over time,” and to “take appropriate action if we begin to have concerns.”

Open source shipping data, derived from Lloyd’s List Intelligence, Marine Traffic, and Digital Seas, suggests that Iran could be deriving greater benefit from the JPOA sanctions relief than intended. The total capacity of the vessels departing Iran with oil have increased significantly.

During 2013, the average monthly capacity in tonnage of Iranian crude oil tankers sailing from Iran was about 31.7M barrels per month. The JPOA calls for no further reduction of these exports, so it was expected that the monthly capacity of these vessels would remain steady. Thus, during the JPOA period, based on last year’s figures, we would expect the total capacity of Iran vessels exporting oil not to exceed 190.2M barrels (31.7 x 6 months). However, in the first two months of the JPOA period, between January 20 and March 20, the capacity has been approximately 107.4M barrels, some 69 percent higher than the 2013 average. This means that Iran could export its allotment by mid-May, some two months before the JPOA expires.

Admittedly, these figures could be explained by Iranian vessels sailing with cargo below capacity. They could also be explained by a drop in oil exports carried by vessels flying under different flags. But even if this is the case, Iran is achieving greater sanctions relief than intended under the JPOA because Iran is not only selling oil, but also charging shipping fees.

Washington has not raised this issue publicly. Nor has the P5+1. But it is important to know whether this would trigger a shut-down of the Iranian exports to permitted importers, or if it would translate into additional sanctions relief before a final deal is reached.

Timothy Wilson is a visiting fellow at the Foundation for Defense of Democracies.