Azerbaijan, Baku, May 16 / Trend S.Isayev/
Iran has so far been unwilling to sell oil at rock bottom prices to free up its storage space and keep country's oil fields producing at current rates, Senior fellow at Nanyang Technological University's S. Rajaratnam School of International Studies, James M. Dorsey told Trend.
The statistics published late last week by both IEA and OPEC indicates a significant drop in Iran's oil output and export volume, as the Western sanctions over Iranian oil sector and banking system are going to take affect in two months.
Some Iranian major oil customers such as the Europe Union, South Korea, Japan and Turkey announced that they have decreased Iranian oil purchase, the fact that is proved in IEA stats, saying 15 to 25 percent of Iran's oil output wasn't sold and had to be pumped into floating tanker storages.
"The fact that half of Iran's tanker fleet is idle and being used serves as further evidence that international sanctions are impacting the Islamic republic's economy," Dorsey said. "Iran's onshore holding facilities at Kharg Island believed to have a capacity of 23 million barrels, and they're full".
Iran's predicament is likely to become worse on July 1 when Europe's oil embargo kicks in, Dorsey added.
"The effect of the sanctions has persuaded Supreme Leader Ayatollah Khamenei to return to the negotiating table despite opposition from President Mahmoud Ahmadinejad who has been locked out of the six party talks about Iran's nuclear program," he said.
Dorsey believes that only after the second round of nuclear talks on May 23 in Baghdad it would be evident to what degree the sanctions make Iran more flexible in coming to an agreement on oversight of its nuclear program.
"Iran will certainly want to avoid a slowdown of production not just because its oil fields are aging but because of the cost and difficulty in restarting production," he noted.
"Iran's only alternative is to sell oil at a significant loss, which at best would only buy it a bit of time."