September 28, 2023 | Insight

The Monetary Value of Relaxed Oil Sanctions Enforcement by the Biden Administration

September 28, 2023 | Insight

The Monetary Value of Relaxed Oil Sanctions Enforcement by the Biden Administration

“U.S. officials privately acknowledge they’ve gradually relaxed some enforcement of sanctions on Iranian oil sales,” Bloomberg News revealed last month. The dollar value of this sanctions relief can be calculated by estimating how much Iranian exports increased due to lighter enforcement, then projecting how much these additional sales have been worth. In August, Iran reported exports of 1.7 million barrels of crude oil per day (mbpd), a level not seen since March 2019. Others put the figure even higher, at 2.2 mbpd, although this memo will use the UANI Tanker Tracker database, which uses publicly available data going back to April 2018. By contrast, Tehran exported an average of 0.775 mbpd while facing the “maximum pressure” campaign waged by the Trump administration. Depending on the discount Iran offered to incentivize purchases from a sanctioned government, the estimated value of Tehran’s additional oil sales — the difference between its realized revenue and what it would have earned had its exports remained at the maximum pressure period’s average level — was $26.3 to $29.5 billion dollars, a number that will continue growing while enforcement remains lax.

Iran’s Oil Exports

In May 2018, the Trump administration declared its exit from the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), paving the way for the revival of American oil sanctions on Iran in November of that year. To ease the consequent shock to global oil markets, the administration issued a six-month waiver that permitted select countries to import up to a million barrels of Iranian oil daily. This waiver expired in May 2019 without an extension.

Data from the UANI Tanker Trackers, which monitors global oil shipments, reveal that Iran’s exports stood at 2.9 mbpd in April 2018, just before Washington’s JCPOA withdrawal. By October 2018, this figure dwindled to 1.8 mbpd as buyers sought to minimize their dependency on Iranian oil. During the six months in which the waiver was in effect, exports averaged 1.39 mbpd. After the waiver’s expiration, Iranian exports averaged 0.775 mbpd for the remainder of Trump’s tenure although there were significant fluctuations month-to-month, as seen in Table 1.

Table 1 – Source: UANI Tanker Tracker Database

Tehran’s exports began growing as soon as Biden took office. They reached 1.14 mbpd in 2021, a 32 percent increase from the year prior. This level of sales persisted in 2022 before another significant leap this year. The average export rate from January to August 2023 has been 1.38 mbpd, a 21 percent increase from the year prior and 59 percent greater than the last year of Trump’s tenure. This steady ascent hints at a sustainable upward trajectory in Tehran’s exports.

To estimate how much Iranian exports increased each month because of lax sanctions enforcement, this analysis subtracts the average daily export in the “maximum pressure” era (0.775 mbpd) from Iran’s export level in each month of Biden’s tenure, as shown in Table 1. In effect, the analysis posits that Biden could have held Iranian exports constant had he chosen to enforce sanctions vigorously.

Assessing the Worth of Iran’s Oil Exports

Tehran’s efforts to obscure its export activities and sidestep sanctions make it harder to determine both the quantity of exports and their likely price. This analysis assumes that Iran offers its buyers a discount for purchasing oil from a sanctioned entity. Since Tehran’s discount offerings likely fluctuate based on time and clientele, this analysis posits three scenarios in which Iran’s oil is priced at 5, 10, and 15 percent below the Brent rate, respectively. For each month of Biden’s tenure (February 2021-August 2023), this analysis takes the estimated increase in Iranian exports as calculated in the previous section and multiplies it by the average monthly Brent price, less the discount for that scenario.

Depending on the scenario, Iran’s total revenue during Biden’s tenure ranges from $81 billion to $90.7 billion. Had Iranian exports remained at the baseline “maximum pressure” level of 0.775 mbpd, revenues would only have been $54.7 billion to $61 billion. The differences between these two sets of figures indicates an Iranian gain of $26.3 billion to $29.5 billion, depending on the discount.

To simplify the calculations, the analysis assumes that a dip in Tehran’s export volume would leave global oil prices unaffected, a plausible premise given the historically minimal price impact of sanctions against Tehran. In other words, had the Biden administration kept Iranian exports to the “maximum pressure” level of 0.775 mbpd, the reduction in global supply would not have pushed prices upwards, partially compensating Tehran for the lower volume of sales.

The spike in Iranian export levels last month may turn out to be transitory, yet the upward trend in 2023 has proven to be resilient. Tehran’s exports will likely remain above the 2021 and 2022 levels and continue to grow as the sanctions wall crumbles. This trend further erodes U.S. financial leverage over Tehran, leaving Washington with fewer means to pressure Iran to restrain the rapid advance of its nuclear program.

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). Follow Saeed on X @SGhasseminejad. For more analysis from Saeed and FDD, please subscribe HERE. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy. 


Energy Iran Iran Sanctions Sanctions and Illicit Finance