The Sanctions imposed upon Iran by the US and EU in response to Iran’s nuclear program, have not been as effective as was hoped. However, that is starting to change. Oil exports from OPEC’s second largest producer are expected to fall due to the inadequate size of the Iranian tanker fleet.
The EU sanctions are causing shipping companies to avoid Iran. A month ago Frontline Ltd., Overseas Shipholding Group Inc. (OSG), and owners of at least 100 super tankers said they would no longer call at Iran because of an insurance ban announced as part of the EU’s sanctions.
This leaves Iran’s domestic fleet to take up the slack, with just one small problem. The National Iranian Tanker Company (NITC) only owns 39 vessels, with a shipping capacity of 70 million barrels of crude. However, the nation’s monthly exports are 65 million barrels of crude, and as many journeys can last two months, Iran does not have the means to export its own oil.
Dag Kilen, an analyst at Fearnley Consultants A/S, a unit of Norway’s second-largest shipbroker, said that “the fleet itself is not big enough to ship all the oil they are normally exporting. I would expect to see a decline in exports as a consequence of Iran not having a national fleet big enough to export the normal volume.”
According to shipping data compiled by Bloomberg, Iran’s fleet accounted for only 37 percent of shipments from Kharg Island (Iran’s largest oil terminal) in January. In February that had risen to 56 percent, and so far this month they have been responsible for 73 percent of the deliveries.
Nikos Varvaropoulos, a Dubai-based official at Optima Shipbrokers Ltd., said that, “owners are not going because of the sanctions restrictions. This is causing a real constraint on Iranian oil shipments.”
In 2010 50% of the governments revenue, $73 billion, was earned from oil sales. Iran produced 3.45 million barrels of crude last month, their lowest since September 2002. It looks like the sanctions are starting to take effect, and Iran must be worried. Maybe it is one of the reasons that they have agreed to reopen their nation to IAEA inspectors.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…