Iran Capitalizes on Russian Invasion of Ukraine To Boost Oil Exports
The geopolitical shifts following Russia's invasion of Ukraine have enabled Iran to increase its oil exports, reaching a five-year high
Iran’s crude oil shipments have increased to their highest level in nearly five years, despite sanctions imposed against it in 2018 after the United States withdrew from the 2015 nuclear deal with the Islamic Republic, according to several reports, including from the International Energy Agency.
Iranian crude oil exports topped 1.5 million barrels per day in May, the highest rate since 2018, according to the reports.
Iranian oil exports could surge in the coming months, particularly to China, as Russian domestic demand will increase in the coming summer and that could lower their [Russian] exports.
Iranian oil exports could surge in the coming months, particularly to China, as Russian domestic demand will increase in the coming summer and that could lower their [Russian] exports
China is the main buyer of Iranian oil exports, Nadeem Ahmed Moonakal, a research scholar at the Rasanah International Institute for Iranian Studies in Saudi Arabia, told The Media Line. Moonakal said that Iran had been able to increase its sales to China by offering it a discounted rate, and that this trend would continue to grow.
“Iranian oil exports could surge in the coming months, particularly to China, as Russian domestic demand will increase in the coming summer and that could lower their [Russian] exports,” he said.
The rise in Iranian oil shipments is the result of a combination of geopolitical and economic circumstances that have enabled Iran to be in a better position to increase its exports. In particular, Russia’s invasion of Ukraine in early 2022 created favorable conditions for Iran to expand its oil sales independently.
Dr. Ramu C.M., a Berlin-based consultant on energy and international politics, told The Media Line that following the Russian invasion of Ukraine, the West’s focus had shifted to the sanctions imposed on Russian oil exports, diverting attention away from Iran.
“The US tanker tracking and sanctions enforcement agencies have focused more of their attention on Russian crude shipments, while mostly overlooking Iran’s clandestine crude exports,” he said.
The US tanker tracking and sanctions enforcement agencies have focused more of their attention on Russian crude shipments, while mostly overlooking Iran’s clandestine crude exports
However, he said that this was at least partly deliberate, as the Biden Administration is equally concerned about not disrupting global oil flows and about enforcing sanctions on Russia.
Francesco Sassi, a researcher in energy geopolitics and markets at the Ricerche Industriali ed Energetiche research center in Bologna, Italy, said that the sanctions on Russia had pushed much of the oil trade to the black market, which has benefited Iran.
“A great deal of the oil market has gone dark since the Russian invasion of Ukraine prompted Western, and in particular European, countries, once major importers of Russian oil, to sanction and embargo its imports. Iran knows how to move in this scenario since its oil has been sanctioned for years and years,” Sassi told The Media Line.
He said that China “has much interest in silently increasing the purchase of discounted oil, whether it’s Iranian, Russian, or Venezuelan.”
Ramu C.M. said that Iran has also implemented various methods over the years to bypass the sanctions against it. These include disabling ship tracking systems, altering draft levels, and conducting ship-to-ship transfers to conceal the true origin of the cargo.
Moonakal said that the IEA has forecast higher oil demand globally in the coming months.
“The entry of Iranian oil into the market is a significant factor that could influence the oil prices,” he said. He added that Iran is aiming to increase its supply, and if more Iranian oil enters the global market, oil prices will fall.
Dimitriοs Makousis, an analyst at the Strategy International think tank, told The Media Line that despite the rise in Iranian oil exports, the country needs great investment in its energy infrastructure, which is hard for it to obtain.
“Iran needs further investment in its energy sector and infrastructure to achieve sustainable economic development and cannot solely rely on increased exports. Investments that are unlikely to come from countries like China and India are required,” Makousis said.
He said that most countries strive to maintain a balance between their economic interests and their ties with the West.
“China, while promoting regional cooperation, stability, and security, and partially countering the United States, is not willing to engage in open conflict with them,” he said.
“The space created in the oil market, with OPEC deciding to support prices, allows the flow of Iranian oil to keep prices stable, preventing significant increases given the increased post-COVID demand,” he said.
Sassi said the US “is walking on a tightrope here,” as more Iranian oil on the market benefits Western attempts to limit prices globally and curtail Russia’s oil revenues.
“But it leaves more wiggle room for Tehran to play its oil card in hyper-politicized global energy markets,” he said.
He said the US “has all the interest in resolving diplomatically Iran’s issue, but the regime seems unwilling to process all the formal steps required to ease the tensions, including reviewing its domestic policies and crackdowns on protests, and also Tehran’s strong axis with Russia developed throughout Ukraine’s war.”
