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The Japanese government tried to melt the freeze between Washington and Tehran by proposing a swap deal involving Iranian oil and U.S. grain, Kyodo reports, citing unnamed government sources.
The proposal was made by Prime Minister Shinzo Abe, who became the first Japanese PM to visit Iran in 41 years in June 2019. The deal was to be worth several billion dollars and initially met with positive reactions in both Tehran and Washington, according to the Kyodo sources.
The deal indeed looked like a win-win situation: Iran needed food and markets for its sanctioned oil. The United States, on the other hand, needed new markets for its grain and soybeans as the trade war with China had had a negative impact on sales, Kyodo reported.
The barter nature of the deal would skirt U.S. sanctions on Iran but removing these sanctions was not on the table, which led to Iran eventually refusing the deal as it insisted sanctions must first be lifted. What is more, Tehran, for obvious reasons, did not trust the U.S. and insisted that Washington makes a commitment first before Tehran accepted the deal.
U.S. sanctions aimed at stifling Iran’s primary source of foreign income have decimated these exports, but Iran is still sending oil abroad. The amount of this oil is higher than the official figures suggest.
According to TankerTrackers.com data, as of August, Iran was exporting as much as 600,000 barrels daily, using ship-to-ship transfers with transponders turned off to avoid detection, skirting U.S. sanctions. The daily average number compares with an estimate of 227,000 bpd made in a U.S. Congressional report.
Most of the oil Iran exports ends up in China, whether directly or indirectly, coming from Indonesia or Malaysia.
According to official data from the Central Bank of Iran, the income from exports of oil, gas, condensates, and oil products totaled $29 billion in the last Iranian year, from March 2019 to March 2020.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,