Iran oil trade choked by maximum pressure campaign

By Nohad Topalian in Beirut and Sina Farhadi


The Iranian-flagged oil tanker Fortune is docked at the El Palito refinery after its arrival to Puerto Cabello in the northern state of Carabobo, Venezuela, on May 25th. Faced with a raft of sanctions, Iran has sought to sell oil to its remaining allies. [AFP]

Iran's oil production and exports have seen a significant drop this year as the Islamic republic faces harsh US sanctions, despite its efforts to sell oil to its allies, including Lebanese Hizbullah, observers told Al-Mashareq.

Hizbullah chief Hassan Nasrallah, a close ally of Iran, on July 7th urged the Lebanese government to pursue the possibility of buying Iranian oil, in a declaration that elicited both government and international objections.

"We could talk with Iranians about selling us gasoline, petroleum and [other] oil derivatives, and pay them in Lebanese pounds," said Nasrallah, who has repeatedly called on Beirut to enter into an oil deal with Tehran.

Lebanese Energy Minister Raymond Ghajar said the government has not discussed oil purchases from Iran, while US Secretary of State Mike Pompeo made it clear that the US will not allow Iran to sell crude oil to Hizbullah.


Hizbullah supporters watch as Hassan Nasrallah delivers a speech on a screen in the southern Lebanese city of Nabatieh on January 12th. Nasrallah recently tried to convince the Lebanese government to buy Iranian oil. [Mahmoud Zayyat/AFP]

"We will not accept Lebanon turning into a satellite state of Iran," Pompeo said.

Lebanese MP Mohammed al-Hajjar, of the Future Bloc, told Al-Mashareq that Nasrallah's statements were directed at his own supporters and allies, and can be seen as an attempt to reassure them amid the current economic crisis.

Nasrallah made his statements while "Lebanon is in urgent need of the international community's support", al-Hajjar said, noting that in these trying times, it is not in Lebanon's interests to align itself with Iran.

Iran has been unable to funnel money to Hizbullah due to a newly imposed blockade, which is why Hizbullah has in turn failed to pay its affiliated entities.

Nasrallah's proposal to import oil from Iran while the US is enforcing the Caesar Syrian Civilian Protection Act of 2019 is part of his "project of changing Lebanon", said political analyst Mounir al-Rabie, of almodononline.

Nasrallah is leading Lebanon to ruin, he told Al-Mashareq, noting however that the Lebanese government "would not dare import oil from Iran".

Nasrallah "does not care about the interests of Lebanon or the Shia community, who are paying a heavy price for his policy", said Shia opposition figure Hussein Ezzedine of the Shia Reform Movement.

His policy "only serves the Iranian regime's agenda", he told Al-Mashareq.

"Nasrallah is increasingly engaging with Iran, which itself is under harsh US sanctions," Ezzedine said, noting that Pompeo's refusal to allow Iran to sell oil to Lebanon sends "a clear message to Hizbullah."

Iran signs 25-year contract with China

Iran's oil production has fallen by 33% so far this year, compared with 2019, and its exports have fallen by 64%. OPEC data shows its overall oil exports have decreased by 70% compared with 2017, when the US began its maximum pressure campaign.

Some Iranian officials have expressed concern about the Islamic republic's inability to manage the oil crisis: Majles Economic Committee chairman Mohammad-Reza Pour-Ebrahimi told the Iranian Students News Agency (ISNA), "Oil has died in Iran's economy, either due to sanctions or COVID-19."

Iran continues to attempt to sell its oil, most notably by entering into a 25-year agreement with China.

Tehran-based economic journalist Ali Nouri told Al-Mashareq there is no major buyer of Iran's oil except China, but China has gradually reduced its oil purchases under pressure from US sanctions.

The Iran-China agreement was initially reported to include oil sales. But days after the agreement was signed, reports revealed that China's oil purchase from Iran has already declined by 90% in 2020, compared to 2019. Within the same timeframe, China doubled its oil imports from Saudi Arabia.

Iran has thus lost China, its main oil customer, in light of crippling US sanctions.

Nouri said the Iranian government came to a 25-year agreement with China "in hopes that oil sales will not reach zero".

Iran's Supreme Leader Ali Khamenei incorrectly assumed the impact of imposing oil sale restrictions on Iran would be massive on the global market, and that it would be impossible to impose harsh sanctions on Iran, he said.

No cash for Iranians from oil 'exports' to Syria

The Islamic republic has been trying to secretly sell and smuggle oil over the past several months, using various means to circumvent US sanctions.

According to a Tanker Trackers report, a number of Iranian tankers turn off their location trackers and move alongside larger ships to avoid revealing their route.

Tehran-based economist Zahra Zanjani told Al-Mashareq the Islamic Revolutionary Guard Corps' Quds Force (IRGC-QF) is in charge of a portion of Iran's oil sales, although it is unclear how big this portion is.

Iran's oil-smuggling customers are usually China and Russia, sometimes also India, he said. These are non-cash transactions which are generally settled through exchange of commodities.

Another portion of Iran's smuggled oil goes to other countries such as Syria, and does not bring any money into the country. "This is part of the cost Iranian people pay for the regime's expansionist policies," Zanjani said.

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