Tehran has a decision to make, again

Commentary Materials 3 November 2018 13:46 (UTC +04:00)
Will the US be able to coerce Iran into changing its overall policy through sanctions?
Tehran has a decision to make, again

Baku, Azerbaijan, November 3

By Azer Ahmadbayli – Trend:

Will the US be able to coerce Iran into changing its overall policy through sanctions, given its forty-year acquired immunity to them? Will the country and the ruling Iranian authority be able to withstand the new wave of pressure? These questions are of great concern to many.

On Nov.4, the US is going to impose sanctions on Iran’s oil, its gas industry and the banking sector.

Iran’s President Hassan Rouhani has said Iranians may face more difficulties in the months ahead, and that the government will utilize its entire capabilities to alleviate the problems, world media outlets reported Wednesday referring to Iran’s state TV.

Limiting oil exports

Based on data from the International energy Agency (IEA) and other trustful sources, in September the volume of exports of Iranian oil and condensate ranged from 1.7 to 1.9 million b/d compared to a peak of 2.7 million b/d in June, CNBC wrote.

According to Reuters, citing data from Refinitiv Eikon, in the first week of October, deliveries from Iran decreased to 1.1 million b/d compared to the second and third quarter, when Iran on average shipped 2.5 million b/d.

China and India are the main buyers of Iran's oil.

The import of Iranian oil to China in September fell by 34 percent (year on year) to 2.13 million tons (or 518,3 thousand barrels per day) on the background of U.S. sanctions, Reuters reported referring to data from the General customs Bureau of the PRC.

Prior to that, the Wall Street Journal reported that China National Petroleum Corp. (CNPC) and China Petrochemical Corp. refused to import Iranian oil in November.

India is the second largest buyer of Iranian oil. In November New Delhi plans to obtain 300 thousand b/d, which is more than twice below the average level of purchases from April to August.

The US has agreed to withdraw India from oil sanctions against Iran, so that the country will be able to continue its imports of about 1.25 million tons of Iranian oil per month until March 2019. A statement on this can be made in the coming days, according to the Economic Times.

“India and the United States agreed in general on exemption from sanctions. India will reduce oil imports by a third, which alone is a big reduction,” the newspaper wrote.

European companies are likely to completely abandon the purchase of Iranian oil. According to sources of Reuters, Total, ENI, Saras, Repsol, Cepsa, and Hellenic Petroleum stopped buying Iranian oil.

Measures to secure survival

Iran is making efforts to put in practice fresh measures which will help it resist the US sanctions. Recent statements of the Iranian officials, their lately visits and practical actions give a common picture of developments in the eve of imposition of the next package of sanctions.

On Wednesday and Friday Iran's Foreign Minister Mohammad Javad Zarif made one-day visits accordingly to Islamabad and Ankara to meet with top officials of the two countries. Though the official agenda suggested issues other than sanctions, it seems that Tehran wants to make certain that its surroundings are safe and ties between the neighboring states are kept intact in the run-up to the forthcoming US sanctions.

Iranian Foreign Minister Mohammad Javad Zarif said during the trilateral meeting of Iran, Turkey and Azerbaijan foreign ministers in Istanbul last week that the three countries have agreed to use local currencies in commercial transactions, Middle East Monitor reported on October 31.

Iran began selling crude oil to private companies for export on Sunday, part of a strategy to counter US sanctions which come into effect on Nov. 4 and aim to stop the country's key crude exports. Out of 1 million barrels offered on the energy bourse, 280,000 barrels were sold at $74.85 per barrel. The launch of oil bourse can somehow overcome the limitations, former Iranian MP Gholam Ali Meygoli-Nezhad told Trend.

Some Iranian officials including three newly appointed ministers have called for more freedom of exporters and support for the private sector. The new ministers promised to remove barriers from the country’s exports and production.

Iran has to use the bilateral monetary treaties as they can facilitate money transfers and exports for Iran, but infrastructure should be provided for implementation, Chairman of Investment and Capital Committee of Iran Chamber of Commerce, Abbas Argon told Trend.

“Any form of agreement which facilitates monetary transfers can reduce the impact of US sanctions. In this regard, we need to increase our engagement with other countries and expand trade relations,” said Argon.

Iran's Supreme leader Ayatollah Ali Khamenei has approved 11 directives of the Supreme Economic Coordination Council`s 4th meeting for Forex market control, according to the Iran president's official website.

The directives say that all non-oil exporters are obliged to deliver their export currency to the NIMA System within a maximum of 3 months, or transfer the export earnings to the country by any other ways which are determined by CBI. Due to the special economic conditions of the country, failure to comply with this order is considered as currency smuggling.

Any natural or legal person is able to bring any amount of currency to the country in accordance with the regulations specified by Iran's Central Bank, and none of the security and customs authorities have the right to prevent it.

Buying and selling currency is permitted only in authorized banks and exchanges, trader offices in accordance with the regulations of Iran's Central Bank. The creation of a psychological fluctuation and inflammation is considered as a disruption of the economy and the authorities and the judicial authorities are authorized to deal with it legally.

In order to further increase trade turnover between Iran and Iraq, an Iranian products trade center will be set up in Sulaymaniyah city of Iraq, Deputy Governor of Iran’s East Azarbaijan province Ali Jahangiri said, according to IRNA.

Jahangiri said that the center will be set up by the private sector and will export Iranian products to Iraqi city of Sulaymaniyah and other cities of Iraq and Syria.

A few days ago former Iranian President Mohammad Khatami warned that popular protests will erupt in the country if the regime makes the same mistakes.

“If the regime insists on its mistakes, criticism will turn into protests, and it is not clear what will happen to the country after that,” Khatami said on his Telegram account.

He stressed that the reformists’ demands are limited to reforms within the system and they don’t call for changing it. “If the public is convinced that the reformists can't do anything, the street will stand behind those who want to change the regime,” he said.

Iran’s oil export is gradually getting down, and with it, currency flow into the country is also shrinking. Tehran will have to decide whether to direct its diminishing financial resources for the development of its missile program and support its military in the region or for urgent implementation of socio-economic reforms and lifting social tension in the Iranian society.

There seems to be not enough money to do both. That’s probably what Mohammad Khatami meant.