Iran explores ways to wean itself off sanction-hit oil

Tehran, Nov 5 (SocialNews.XYZ) Iranian authorities are trying to wean the country off oil and are exploring alternative products to export after a year of tough United States sanctions continued to suffocate the sector and stoke tensions in the region.

Sanctions against Iran's oil and banking sector came into force on November 5, 2018 in what was the second round of measures Washington took out against Tehran after US President Donald Trump withdrew from the international 2015 Nuclear Deal.

Trump's administration said it wanted to reduce Iranian exports to zero but it failed to achieve that target even after it cancelled exemptions initially allowing eight countries to continue buying Iranian crude oil, Efe news reported.

The end of the exemptions, granted to the likes of China, India and Turkey, meant Tehran had to start changing tactics - a period marked by several sabotage attacks against oil tankers in the Persian Gulf, which the US said bore the hallmark of Iranian handiwork despite Tehran's denials.

Before the sanctions, Iran was exporting an average of 2.5 million barrels of oil a day.

That tally has now tumbled to roughly 400,000, according to unofficial estimates.

Authorities in Iran keep oil sale figures secret, as do importers. But earlier this month, the governor of Iran's central bank Abdolnaser Hemmati denied reports from the US that Iranian oil exports had dropped to 120,000 barrels a day.

Reza Padidar, president of the Energy Commission at the Tehran Chamber of Commerce, told Efe that Iran had turned to so-called barter contracts, whereby goods or services are swapped without cash transactions.

"If one way is closed, another is opened," he said.

"China is one of the countries that currently receives oil from Iran and is traded through barter, a contract we also have with India, where we receive rice or other derivatives, or with Turkey."

Many Iranian oil tankers have also turned off their GPS tracking and authorities have opted to diversify exports crude oil derivatives such as gasoline, diesel and petrochemicals.

Padidar said the country's policy was to convert oil into an "intermediate or final products" for export.

Iran's government has said that 30 per cent of the economy depended on oil, down from 50 per cent before the sanctions, and that it intended to bring it down to zero.

"The direct effect of the cruel sanctions is the decrease in growth of the oil sector and the reduction of resources in the state budget. All this has affected the non-oil sector and, of course, the growth of the entire economy," Hemmati said.

Iran's economy is expected to contract 9.5 per cent this year, revising a previous estimate of 6 per cent, according to the International Monetary Fund.

The sanctions have also taken a bite out of Iran's currency value.

The rial now trades at 111,000 per dollar compared to 42,000 a year and a half ago, which has fuelled inflation this year up to 35.7 per cent, according to the IMF.

In May, four oil tankers - two of them Saudi - were attacked in apparent sabotage in the Emirati port of Fujairah.

A month later, two tankers, one charted by a Norwegian company, the other by a Japanese one, were hit by explosions as they left the Strait of Hormuz, a crucial thoroughfare in the global oil sector.

Last June, the Iranian Revolutionary Guard shot down an American drone that, according to Tehran, had violated its airspace.

In July, Iranian forces seized the British flagged Stena Impero for allegedly breaching navigation rules.

Then, in September, two oil facilities in Saudi Arabia were hit by explosives, reducing the country's oil output by 50 per cent.

The US and Saudi Arabia have directly and indirectly accused Iran of all of these incidents, while Tehran insists it was not involved.

In a bid to reduce tensions, and to avoid the deployment of more US troops to neighbouring countries, Iran has offered a joint initiative to keep peace in the region although it is not clear what the reaction to that has been.

Source: IANS