The Forum for Partners in Iran's Marketplace

October 2018, No. 89

Oil & Gas

Sanctions on Iranian Oil Customers

In the first 6 months of 2018, India has imported about 550,000 barrels of oil from Iran on an average daily basis.

China is the largest buyer of Iranian oil, accounting for more than 40 percent of Iran’s oil exports. However, Iran’s oil covers less than 10 percent of oil imports by the world’s largest oil importer. Energy consultancy Facts Global Energy (FGE) believes that China is unlikely to completely halt buying Iranian oil, although the possibility of reducing import of 700,000 barrels of oil from Iran may encourage China to play with the energy card of Tehran to get concessions from Washington.

In addition to geopolitical rivalries that shape the complexity of the talks, China and the United States are very important trading partners. Therefore, it is not only hard for Washington to impose sanctions on China but a trade agreement on controversial tariffs can also persuade China to cut oil supplies from Iran.

India also has a large share of Iranian oil imports so that New Delhi and Beijing are the most important targets of Trump for negotiations. While China has an economic and political conflict with the United States, the government of Narendra Modi has been successful in not infuriating Trump, although economic pressure on Indian consumers could change the situation. In the first 6 months of 2018, India has imported about 550,000 barrels of oil from Iran on an average daily basis. India’s oil minister said in a meaningful speech that India continues to rely on Iraq as the main oil supplier. Iran is the second largest oil exporter to India, but New Delhi has cut its oil import from Iran by one quarter in the past year. Only in May, India’s oil purchase from Iran dropped by 16 percent. At the same time, the US has increased its oil exports to India to make things easier for New Delhi. The increase registered a record in June and was doubled in the past year.

Iran’s third largest purchaser of oil in the first half of 2018 was South Korea. The Asian country buys about 220,000 barrels of oil per day from Iran, which has a long way to go to reach India and China, but the figure is still significant. However, after a drop of 179,000 barrels in May, which was the lowest purchase from Iran since January 2016, it stopped purchases in July. In the meantime, South Korea has quadrupled its oil imports from other Asian countries at this juncture of 2018, indicating that Seoul too has plans like New Delhi.

The next buyer of Iran oil is Italy. Although Italy is not a signatory of the Joint Comprehensive Plan of Action but like other European states it is an advocate of the JCPOA. The “boot” of Europe, which imported about 180,000 barrels of oil a day from Iran in the first six months of 2018, has said it is committed to economic relations with Tehran. It is unlikely for Italy to close its relations with Iran as long as the European signatories of JCPOA support Iran’s oil exports, however, in the month of July Rome did not make any purchases from Iran.

The fifth largest buyer of Iranian oil during the above-mentioned period was the neighboring country, Turkey. Turkey’s purchase is several thousand barrels less than Italy, but Ankara has officially announced that it will not reduce its trade relations with Iran due to Trump’s positions and threats. Of course, Turkey lowered its purchases in May, but has informed Washington several times that it would not undermine its ties with Tehran. Replacing Iran’s oil is difficult for Turkey because not only Ankara needs others for almost all of its oil imports but in the first quarter of 2018 it bought about half of its oil from Iran.

Another important customer of Iran is Japan, which in the first six months of 2018 as the sixth buyer of Iranian oil, imported nearly 150,000 barrels daily. Japan announced last week that it was seeking to be exempted from Washington’s sanctions on Iran. One of Japan’s top officials has said this is about energy security and the need for refineries. Japan, the world’s third largest economy, has the power to encounter or get concessions from Washington, but firstly, the US exercises great influence on Tokyo, and secondly everything depends on future developments.

The seventh, eighth and ninth purchasers of Iranian oil are Spain, France and Greece, respectively. The first two countries buy about 100,000 barrels and the last one purchases about 70,000 barrels per day. Iran has other customers which together buy about 210,000 barrels per day. The problem here is that even if all these countries refuse to give up to Trump’s unfair demand and those who give in maintain part of their purchases, there would still emerge serious troubles for the Iranian economy. If Saudi Arabia and its allies fail to sustainably increase their production in order to capture Iran’s market share, and in the face of the resistance of countries such as China or other arrangements made by Iran, it was not possible to completely cut off Iran’s oil exports, it would not be difficult to inflict another blow on the Iranian economy. If we take into account the positions taken by the said countries and their share of oil imports and exports it seems that diplomacy would help more the Iranian economy that has just come out of the sanctions. The alarm coming out of statistics and statements must be taken seriously!


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  October 2018
No. 89