Even before the reinstatement of sanctions earlier this week, Iran’s oil exports had already fallen by as much as 40 percent from their previous high, or one million barrels per day (bpd). Secretary of State Mike Pompeo reported that Tehran had already lost $2.5 billion of revenue as a result. Despite the restriction of Iranian supply, oil prices are at a six-month low of about $70 per barrel for Brent crude.
In percentage terms, U.S. allies in Europe and Asia pared back their purchases most sharply. France, Spain, Japan, and South Korea each cut imports down to zero from an average level of about 100,000 bpd over the past year. Italy and Greece also curtailed imports by more than half.
In terms of volume, India made the largest cut, from over 700,000 bpd in mid-2018 to 350,000 bpd in October, the last full month before sanctions went back into effect. In contrast, Chinese imports from Iran remain at or near their peak, with purchases of about 750,000 bpd in October.
The degree to which Iranian exports have declined overall depends materially on the baseline against which one measures current exports. Data from Bloomberg indicate that Iran exported roughly 2.4 million bpd each month from October 2017 through March 2018. Against that baseline, the October 2018 figure of 1.76 million bpd represents a loss of 27 percent. Yet compared to the single-month high of 2.88 million bpd in April 2018, the loss is about 40 percent.
The level of uncertainty regarding Iranian exports has also risen now that Iranian tankers routinely conceal their location by turning off their Automatic Identification System, a serious violation of maritime law. According to the Tanker Trackers analysis group, Iranian exports last month totaled only 1.62 million bpd, not 1.76. On the other hand, Tanker Trackers reported 2.01 million bpd of exports in October, compared to Bloomberg’s figure of 1.72 million.
This uncertainty points to the importance of gauging Iranian exports over a period of several months, rather than measuring success based on any one figure. During 2015, the year before the implementation of the nuclear deal, Iranian exports ranged from 1-1.5 million bpd, according to data from the U.S. Energy Information Administration.
Precise measurement of exports will be especially important for U.S. policy in light of temporary exceptions to the new sanctions that the Trump administration has granted to eight current importers of Iranian oil: China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey. The secretary of state explained that “Each of those countries has already demonstrated significant reductions of the purchase of Iranian crude over the past six months” and the U.S. will “continue negotiations to get all of the nations to zero.”
The reduction by China is not yet visible in publicly available export figures; Pompeo may be referring to a possible reduction of planned purchases for the coming months.
Curtailing Iran’s exports represents an essential component of the U.S. plan “to starve the Iranian regime of the revenue it uses to fund violent and destabilizing activities throughout the Middle East,” in the words of Secretary Pompeo. Thus, the U.S. should insist on progressive reductions by all of Tehran’s customers. The U.S. should also carefully monitor the escrow accounts where oil revenue will be held. In the past, Iran and Turkey colluded to launder tens of billions of dollars, much of it withdrawn from the escrow accounts. Any country that facilitates such actions should immediately lose its oil purchasing exemption.