The United States under the Trump administration has made some drastic foreign policy changes, moving away from the path of the Obama administration. The result is that the relationship with Iran has altered drastically as President Trump calls out the regime for its actions in regard to the ballistic missile program and its human rights violations.
Throughout his campaign for the presidency, Trump also pointed out the flaws of the Joint Comprehensive Plan of Action (JCPOA), claiming that it was so flawed that it needed to be scrapped altogether. Despite efforts by his European allies, the U.S. pulled out of the agreement in May and the sanctions that had previously been waived are now going back into effect. However, there is a 180-day window during which buyers have the opportunity to wind down their purchases with the Iranian regime.
While the economic impact might not be felt right away, one area of Iran’s economy is already feeling the crunch. According to Geneva-based Petro-Logistics, Iran’s crude oil exports have declined slightly in May. This is just the first sign that U.S. sanctions may be starting to deter some buyers from working with Iran.
At the same time, the fact that it was only a slight reduction means that buyers are not rushing to cut their volumes from OPEC’s third largest producer.
“Exports are down by more than 100,000 barrels per day (bpd) from the very high levels seen in April, but there is not sign of a mass exodus at this time,” said Daniel Gerber, chief executive of Petro-Logistics. “In fact, May exports remain significantly higher than the previous 12-month average, with European refiners continuing to load cargos throughout the month.”
The company did not specify the absolute volume of Iran’s oil exports for the months of April and May.
Measuring supply and demand in the oil market is opaque, meaning that consultancies, such as Petro-Logistics, are estimating supply from OPEC countries based on their tanker shipments and other methods.
The Iranian government has reported exporting 2.6 million barrels per day in April, which is a record since the JCPOA lifted international sanctions on the country in January of 2016.
The bulk of their crude oil exports are going to Asia and the rest primarily is designated for European markets. The volumes going to Europe are more susceptible to the impact of U.S. sanctions being reinforced. The Iranian regime is hoping the JCPOA can be salvaged, but if not, there are also financing issues that may come into play, hampering the Iranian oil trade over time.