Iranís Oil Industry is Trying for a Comeback

Source: 10/30/2013, Location: Asia

There are signs under the new president, Hassan Rouhani, that efforts to attract old clients of Iranís oil may be boosting the countryís most essential economic lifeline.

China, India and Japan, which together account for half of Iranís oil exports, have increased their purchases over the past several months, offering some hope to Iran and complicating U.S.-led efforts to put pressure on the country.

Under the U.S.-led sanctions, some importers of Iranian crude have been granted short-term waivers to continue buying if their imports demonstrate significant declines during six-month intervals. China, India and Japan received such exemptions.

The flow of oil is vital to Iran as oil exports make up nearly half of its revenue.

Overall, the International Energy Agency (IEA) reports that Iran increased its oil exports by 180,000 barrels per day in September over the previous year, a 26 percent increase. But the monthly total of 1,170,000 barrels per day still represents a far cry from what industry insiders and analysts say is possible.

ďThe great problems we face today in production, exports and purchase of commodities in the petroleum industry have never been like they are today,Ē Iranís oil minister, Bijan Namdar Zanganeh, told a gathering of industry officials.

Under the sanctions, China, Iranís biggest buyer, is supposed to reduce its intake by 5 percent by the end of the year if it is to qualify for a new waiver. Instead, Chinaís imports of Iranian oil are on the rise, up 1.4 percent this year compared with the previous year, according to IEA figures.

In September alone, Chinese imports of Iranian oil jumped by 24 percent compared with the same period last year. China still relies on Iran for about 10 percent of its crude imports.

Some Iranians have begun to express hope for a deal between Rouhani and the West that might even lead to a lifting of sanctions, opening the way to new investment by international companies and to renewed exports.

Zanganeh said recently that Iran hopes to ďtake advantage of the power of oilíí in seeking broader access to international markets.

At the same time, India has sought recently to pay its oil debts to Iran in rupees rather than in dollars, an arrangement that Tehran is not eager to accept at a time when Iranís foreign currency reserves are quickly dwindling.

For that reason, Iran is looking west for oil partnerships.

Turkey, an important customer, buys 100,000 barrels per day from Iran, and officials there say they are willing to buy more if it is available.

The European Union, which completely halted oil imports from Iran in July 2012, also seems poised to reenter the market, with 10 member states receiving sanctions waivers last month. There are no statistics about exports to those countries, but Italy, Spain and Greece traditionally imported large volumes of Iranian oil.

According to Western diplomats in Tehran and industry officials, international oil companies that once had a presence in Iran are negotiating with the new government to return, and several European companies have sent delegations to explore oil opportunities.

ďA large number of traditional buyers of Iranian crude oil are making the preparations for raising their crude oil purchases from Iran,Ē Mohsen Qamsari, director of international affairs for the National Iranian Oil Co., said last week in an interview with Shana, a news agency dedicated to the domestic energy sector.

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