Iran’s crude oil exports were set to fall in the spring, suggesting that the country is struggling to raise exports after clearing out stocks stored on tankers. While a decline in demand may be part of the reason for the decline, as exports to India have slumped and orders from Japan have also fallen.
While the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers have agreed to cut production in order to boost prices, the reality is that oil and natural gas remain plentiful on the international market. Iran was exempted from an agreement by OPEC to reduce output, a victory for Tehran. The regime argued it needed to regain market share that was lost under the now lifted Western sanctions.
In addition, the change of orders from India seems to be designed to pressure Tehran to award a contract for the Farzad B gas field to an Indian consortium. China is also not ordering large amounts of crude oil exports, demonstrating that the economy in that country has slowed significantly.
On Sunday, July 30, Japan’s trade ministry released official data showing its Iranian imports in July tumbled by nearly half, reflecting a sharp decline. Last year during the same period, Iran had exported 293,000 bpd to Japan. This is just one example showcasing the drop in oil exports from Iran to the Asian region.
Between China, India, South Korea and Japan, the imports from Iran were down 15.2% on a year ago, and the lowest amount since 1.32 million bpd in April of last year, according to government and ship-tracking data. This is the second month that these four main Asian buyers have dropped their import volumes since various economic sanctions were lifted in relation to the JCPOA.
While Iran sits on the world’s fourth largest oil and gas reserves, as well as being among the world’s top 10 oil producers and top five natural gas producers, it seems the international community might not be lining up to make purchases. This is despite the fact that the 2015 nuclear agreement went into effect, lifting sanctions and allowing Iran more access to international markets.
However, with new sanctions impacting various individuals and potentially designating the Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization, Iran’s economy may be taking an additional hit.
This is contributing to the civil and social unrest within Iran, which is making it difficult for the regime to maintain its control over the country. While approval of the nuclear agreement among Iranians seemed to be based on what were seen as economic benefits, nearly two years later, the economic benefits have not materialized. Instead, the IRGC and the regime itself continue to benefit and the funds that were unfrozen have been used to fund various military initiatives. The regime is feeling the pressure domestically, and export news like this is only going to churn that unrest further.