In contrast to previously defiant statements that Iran will withstand any sanctions of its ‘enemies’, Iranian President Hassan Rouhani admitted on Tuesday that it is now very difficult to run the country with severely crippled oil revenues.
“Although we have some other incomes, the only revenue that can keep the country going is the oil money,” Radio Farda quoted Rouhani as saying, when he commented on the reduced oil revenues because of the U.S. sanctions on its oil industry and exports.
“We have never had so many problems in selling oil. We never had so many problems in keeping our oil tanker fleet sailing,” Rouhani said in a speech during a visit to the city of Kerman in southeast Iran.
“How can we run the affairs of the country when we have problems with selling our oil?” Rouhani added, as carried by Radio Farda.
In an English translation of his speech at the official website of the president of the Islamic Republic, Rouhani was quoted as saying:
“We all know that our country is not in normal conditions. A person who is not familiar with budget and economy may say that not selling oil is not very important, but the truth is that these great God-given resources are here for us to use.”
Iran will also have difficulties in restoring production at oil wells once the current sanctions are lifted, Rouhani said, noting that Iran spent US$800 million to reactivate oil wells to production after the previous sanctions were lifted in early 2016.
The admission that crippled oil revenues—which was the primary purpose of the U.S. when it slapped sanctions on Iran’s oil—hurt Iran’s economy and state budget comes just days after Rouhani announced Iran had discovered a new oil field with reserves estimated at more than 50 billion barrels—a figure that the energy minister later walked back to 22 billion barrels, 2.2 billion of which is thought to be recoverable.
By Tsvetana Paraskova for Oilprice.com
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What Iran might consider, to take some pressure off, is to throttle back on exporting Islamic Jihad. Along with the Jihad is interference with world access to oil. That won't play well for a lot of countries. Even the countries sympathetic to Iran face the prospect of the conflict blocking their access to oil as well.
The first is an appeal to the hardliners in Iran to relent and accept to renegotiate the nuclear deal with the United States against lifting of the sanctions. However, sanctions against Iran will never be lifted since Iran will never renegotiate the nuclear deal because the Iranian leadership doesn’t trust President Trump. He reneges on any agreement negotiated with the United States as was the case with the nuclear deal. Iran could therefore afford to wait until it sees the back of President Trump. Still, It will never negotiate with President Trump’s successor either until he accepts Iran’s preconditions, namely lifting the sanctions and restoring the nuclear deal.
The other interpretation is to lull the Trump administration into a false sense of security thus pre-empting additional US sanctions on Iran’s refined and petrochemical products which are currently earning Iran a sizeable income. After all, chess is a national game in Iran and the Iranians have produced great chess champions.
And contrary to claims by President Rouhani, US sanctions have so far failed miserably to prevent Iran from exporting the bulk of its crude oil in one way or another using its own tanker fleet to transport the crude to China, India and also Syria.
President Rouhani’s statements are inaccurate like his earlier claim two days ago that Iran had discovered a new oilfield with reserves estimated at 53 billion barrels (bb), a figure that Iran’s oil minister later reduced to 22 bb of which only 2.2 bb are thought to be recoverable.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London