Iran’s Oil Buyers Scramble to Slash Purchases ahead of US Sanctions

Even top buyers who are not party to the US sanctions which go into effect on Iranian oil sales on Nov. 4 are finding themselves squeezed, although Tehran is employing every trick to keep almost 800,000 barrels a day flowing. Iranian diplomats have been bending every effort to better relations with Pakistan, Turkey and the Caspian states – with scant success. When Iran’s Foreign Minister Mohammad Javad Zarif arrived in Islamabad on Aug. 30, he found new Pakistan Prime Minister Imran Khan ready to talk about every subject except oil, including a bid for Iranian investment to develop the Chabahar and Gwadar ports. DEBKA Weekly’s sources report that Khan had been quietly warned that if he wants to improve relations with Washington, he had better avoid discussing ways of beating the US embargo on Iranian oil sales.

Zarif faced another disappointment on Aug. 29 when he visited Ankara, having expected to win support after Turkey advised the US to give up its “addiction to sanctions.” There, he encountered an obstacle in the form of Turkish President Tayyip Erdogan’s objection to the coming Russian-Iranian-Syrian offensive in rebel-held Idlib province. This cast a cloud on the Tehran summit on Sept. 7 at which the Iranian, Turkish and Russian presidents were to discuss and plan this offensive. Erdogan was in no mood to play ball with Iran for circumventing US oil sanctions, but he did not say no to a deal, albeit one that Tehran could not accept. If Iran pulled out of the three-cornered Idlib offensive, Ankara would consider helping Tehran sidestep US oil sanctions.

The Iranian foreign minister’s plan to enlist the aid of Caspian governments against the US oil embargo ran up against a domestic row over the sharing out of Caspian Sea resources.

At the Fifth Caspian Summit in Kazakhstan on Aug. 12, the five Caspian states agreed on a convention that made the main area of the sea’s surface available for “shared usage,” while dividing the seabed into five adjacent sections, based on international law. The convention prohibited the presence of military forces of foreign or regional powers on the sea. This convention sparked heated indignation of nationalist groups at home. They accused the Iranian government of accepting the short end of the stick due to unwarranted flexibility. Iran came out of the summit with its share of Caspian Sea slashed from 50pc to 13pc. In this domestic climate, Iranian diplomacy cannot afford to cosy up to the Caspian states, of which Russia is foremost.

Tehran is left with China and India as its most promising post-sanctions buyers, with China’s refineries hopefully taking some of the smuggled and illicit shipments. However, that too is not plain sailing. India’s imports have tumbled already and face a 50pc cutback. Flows to China, the world’s leading crude purchaser, have also decreased; shipments to South Korea shrunk by over 40p in July, while Japan says its September deliveries from Iran may be the last.

With this scenario, Iran’s oil exports look like staying at a low 800,000 bpd, including 20,000 barrels trucked to Iraq, Afghanistan and Pakistan. Most oil experts agree that sales will slump below a million barrels per day by mid-2019.