Iran's position in the oil market is weaker than ever, with a bleeding OPEC meeting and a narrower network of US sanctions leaving it with fewer friends and fleeing customers.
Tehran is hit from all sides. Washington is calling on shoppers to stop all crude oil purchases while OPEC and its allies are bowing to US pressure to increase production and fill the gap. Iran has few options left to persuade China to buy more of its oil and risks being overly dependent on its largest customer.
"Iran is currently in a really terrible situation," said Sara Vakhshouri, head of Washington, DC-based consultant SVB Energy International. "There is not much that Iran can do to maintain its exports."
Previous At a meeting of the Organization of Petroleum Exporting Countries, Iran had called on its counterparts to Condemn "illegal" reintroduction of sanctions by President Donald Trump and oppose US pressure to increase group production. It failed on both counts as Saudi Arabia and Russia interpreted a vaguely worded agreement as a license to pump an additional 1 million barrels a day, ruining production by other members.
"Iran is irrelevant to OPEC," said Olivier Jakob, managing director of the consulting firm Petromatrix GmbH. "The OPEC communiqué was vague and the message was ousted by the Saudis and Russians, so you can see who bears responsibility here."
After Iran was largely abandoned by its OPEC counterparts, it became its largest Enemy hit even harder. The US State Department said it wanted to boost its oil exports to " zero" and rejected the gradual sanctioning of President Barack Obama's government in 2012.
It is not clear that the US will come to a complete standstill, because even American allies are dissatisfied with the one-sided task of the Iranian nuclear program
"Korea, China, Japan have already stated that they can not go to zero "Iranian OPEC Governor Hossein Kazempour Ardebili said in an interview on Wednesday
However, there are many other indications that sanctions could reduce a significant portion of the 2.5 million barrels of crude per day, which currently exports the nation in the Middle East.
In an interview with Bloomberg Television last week, Oil Minister Bijan Namdar Zanganeh said that buyers including France's Total SA and Royal Dutch Shell Plc have already made purchases. Total's CEO, Patrick Pouyanne, said last month that it would be unthinkable for an international company to be excluded from the US financial system – the punishment for buying Iranian crude after 4 November.
Total's position highlights the immediate threat to Iran's raw exports, as well as the long-term damage it might do to the country's oil and gas industry. The company has begun to withdraw from the South Pars 11 natural gas project, the largest investment by an international energy company.
Iran's crude oil sales will plummet by at least 500,000 to 600,000 barrels a day this year, with the downfall possibly much higher given Tuesday's announcement by the State Department, according to Vakhshouri. John Browne, former CEO of BP Plc and now Chairman of L1 Energy Holdings Ltd., expects a decline of up to 1.5 million barrels a day.
At least some buyers of Iranian supplies are considering yielding to Trump's demands. Europe, the second largest destination for Iranian crude oil to Asia, is likely to take more Russian, Saudi Arabian and Iraqi barrels, Jakob said. China could buy more oil from Iran, although the country needs time to arrange deals that circumvent US funding and shipping restrictions, said Sri Paravaikkarasu, an oil analyst with Advisor FGE in Singapore
"Iran will definitely try to look to China, which in a way is the last resort, "said Paravaikkarasu. "Indian private actors have clearly stated that they will reduce Iranian imports, while Japanese and Korean refineries will" predominantly "comply with US pressure, she said.
Crude oil sales continued largely normal until June and some customers should stop deliveries from July, according to an official in the Iranian state oil company, who have asked not to be identified when discussing confidential matters. Zanganeh said that Iran is working on methods to circumvent the sanctions so that it can continue to export without giving any details.
Citing mainly China – which largely maintained its imports from Iran during the latest sanctions from 2012 to 2016 – could generate the minimum amount of revenue Iran needs to pay for essential goods, food and medicines, said the Vakhshouri the SVB. But it would also be risky to rely so much on a single buyer, especially a country involved in its own tense negotiations with the US
"If the US and China reach a trade agreement, we could become significant Iranian Oil import cuts, "said Vakhshouri.