Sanctions Take Toll on Iran’s Influence in the Global Oil Market

Yesterday, Iran’s Oil Minister Rostam Qasemi told an
audience at the World Energy Forum in Dubai that the Iranian government would
halt all of its oil exports if the United States and other western powers
strengthened their antinuclear sanctions against Tehran. “If
you continue to add to the sanctions, we will stop our oil exports to the world,”
Qasemi told a news conference, according to Bloomberg
News, adding, “The
lack of Iranian oil in the market would drastically add to the price.”

In the past, that kind of announcement might have made oil
traders nervous, raising global prices. But since the international sanctions
have been in place, Iranian oil exports have shrunk considerably, from 2.2
million barrels a day in 2011 to 860,000
barrels a day in September 2012. Iran’s shrinking share of the global oil
market – and rising production in places like Saudi Arabia, Iraq and the United
States that is offsetting supply shortages – has weakened Tehran’s ability to
wreak havoc in the global oil market. That’s why oil prices fell to a
three-month low, according to The New
York Times: “On
the New York Mercantile Exchange, the price of the benchmark grade fell $1.98 a
barrel or 2.3 percent to $86.67, the lowest closing price since July 12.”

Most experts agree that Iran is unlikely to halt its oil
shipments to those countries that currently have exemptions to the oil embargo,
like India. The sanctions have already taken a toll on the economy. Iran’s
currency has lost
40 percent of its value and sanctions against the country’s central bank
prevent it from shoring
up its currency with foreign reserves. Iran cannot afford to stop
exporting its oil without further weakening its economy.

But even while Iran may not have as much direct influence in
the global oil market, there is always the possibility that Tehran will try to
indirectly raise global oil prices through more brazen efforts, like
threatening or actually attempting to close the Strait of Hormuz through which 20 percent of the world’s oil is shipped, which would raise global oil prices by as much as 50 percent in a few days. In that sense,
Iran can still wreak havoc in the global oil market and onlookers should keep a
watchful eye towards Tehran’s behavior. 

read more

www.cnas.org