April 13, 2022 | Policy Brief

Iran Likely to Gain More Than $70 Billion From the Removal of Oil Sanctions

April 13, 2022 | Policy Brief

Iran Likely to Gain More Than $70 Billion From the Removal of Oil Sanctions

Mohsen Khojastemehr, the CEO of the National Iranian Oil Company, said earlier this month that Iran’s oil production has returned to its pre-sanctions levels. While this claim may constitute an exaggeration, Iran’s stated progress reflects the Biden administration’s failure to enforce existing sanctions on the country over the past year — and the increasing likelihood that Iran will earn tens of billions of dollars more from oil exports under a new nuclear deal.

In May 2018, the Trump administration left the nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). In December 2018, Washington re-imposed sanctions on the Islamic Republic’s oil exports, although it granted temporary waivers to several countries, permitting six additional months of limited purchases. The sanctions then banned all Iranian oil exports as of May 2019.

According to a tanker tracker database compiled by United Against Nuclear Iran (UANI), in June 2018 Tehran exported almost 2.6 million barrels of oil per day before President Donald Trump re-imposed sanctions. This fell to roughly 800,000 barrels per day by December 2018 and 385,000 barrels per day in May 2019.

The Islamic Republic, Khojastemehr noted, is now producing 3.8 million barrels per day (mbpd). That number contrasts with OPEC’s estimate of 2.54 mbpd in February. Iran’s oil minister, Javad Owji, claimed in early March that the country could reach its peak production capacity in two months.

To be sure, logistical and legal issues may be hindering a rapid increase in exports, thus casting doubt on the accuracy of the two officials’ claims. Regardless, Iran’s current export and reserve data show that Tehran has the capacity to grow its exports to 2 mbpd in a rather short time. Over the last three months, Tehran has exported 1.2 mbpd, according to UANI. Thus, it would need to sell an additional 800,000 barrels per day to reach its capacity.

In that regard, Bloomberg estimates that Iran has 85 million barrels of stored oil it can unload if there is a deal with the United States that lifts sanctions. According to the Federal Reserve Bank of St. Louis, after the implementation of the JCPOA in January 2016, Iran was able to export almost 2 mbpd that same year, up from 1.3 mbpd in 2015. These data points make a compelling case that in a 12-month period after a potential deal with Washington, Tehran can move quickly to export 2 mbpd of oil.

High oil prices will help Iran gain significant revenue. Barclays forecast the Brent crude price for 2022 at $100 per barrel. The U.S. Energy Information Agency predicts the West Texas Intermediate price for crude at $116 for the second quarter, while Goldman Sachs forecast $115 per barrel for 2022. It is therefore safe to project that Tehran will earn $100 per barrel in the first 12 months after Washington lifts sanctions.

Combining this price with a forecast of 2 mbpd of exports yields the conclusion that Tehran will gain $73 billion in revenue after the implementation of a prospective deal with Washington. These gains would supplement other key U.S. concessions in nuclear talks, including making accessible up to $130.5 billion of Iran’s gross foreign assets, reducing Iran’s import costs by $12 billion per year, enabling Tehran to access its revenue immediately, and permitting the regime to move the proceeds across international financial networks.

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). For more analysis from Saeed, the Iran Program, and CEFP, please subscribe HERE. Follow Saeed on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_Iran and @FDD_CEFP. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.


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