Although US President Donald Trump’s decision not to extend the eight-nation exemption from the US embargo on Iranian oil will not be able overnight to cut Iran’s oil exports to zero, but it would certainly leave the Iranian regime in a few months later with two options, collapse or surrender and accept new negotiations for a new deal that would prevent Iran from developing a nuclear weapon, ending its terrorist activities, interfering with the security and stability of the region, stopping its interference in the affairs of other countries, halting its support for terrorist groups such as Houthis and Hezbollah and dismantling all its forces deployed in the region and return them to the Iranian interior. This means that US decisions on force Iran oil exports to zero constitute the main part of regional and international counter-terrorism efforts.
In fact, United States’ intention to cut Iranian oil exports to zero does not mean literally reaching zero in the strict sense, as many argue, but to maintain a constant declining level in these exports to reach the lowest level. Therefore, this policy will be able to dry up the treasury of the Revolutionary Guards and the Iranian regime and the funds used to finance terrorist activities and interventions in the countries of the region, which the Iranian regime secures them from the oil and gas sectors.
Nearly 70% of the hidden budget of the Iranian regime and the Revolutionary Guards comes from oil and gas revenues. Therefore, any decline in Iran’s oil exports would cause a crisis in the treasury of Iran’s regional agenda. The less Iran’s oil exports, the lower its terrorist activities and interventions in the countries of the region. Hence this is the main objective of cutting the export of Iranian oil. this in turn supports the vision of the United States internationally, and gives the international community, especially the countries of the region, a motive to comply with the US decisions and sanctions on the Iranian regime. So, most countries will stop buying oil from Iran and comply with US decisions, not because of the United States, but as part of their commitment to counter terrorism.
Iran’s claims that the United States will not be able to stop the export of Iranian oil and that Tehran has other options, including the closure of the Strait of Hormuz, to counter US decisions are nothing more than a propaganda for domestic consumption and an attempt to motivate Iranian oil customers to disobey the US decision, so giving an impression that the international community is divided on these move. But what is certain is that Iranian oil exports will fall gradually over the coming months and is expected to reach less than 600 thousand barrels per day by the end of this year. This will be possible through the methods of circumvention that the Revolutionary Guards is expected to pursue in selling oil, such as using oil vessels of other countries to export Iranian oil, and the cessation of AIS satellite tracking systems and disguise the potential buyers, as well as the use of countries such as Iraq, Turkey and Qatar to pass oil sales and giving concessions and privileges to the countries antagonized with the United States such as China and Russia and some Latin American countries to continue buying Iranian oil. This is in addition to the use of some oil depots established by the Revolutionary Guards during the past months to ensure the sale of Iranian oil for more months to come.
Using Houthis is also possible to terrorize maritime navigation and target Saudi and UAE oil tankers. Iran might also use technology in launching cyberattacks on Saudi and UAE oil sectors with the aim of damaging global oil markets and creating a severe shortage that would disrupt them. However, the mechanisms that the United States and its allies are intending to follow will greatly limit Iran’s attempts to circumvent sanctions and even use such terrorist activities and this is certain after US officials have confirmed that many plans and programs have been put in place to ensure strict control of Iran’s oil exports. In addition, these twisted methods will impose significant financial losses to Iran, as it will be forced to sell its oil at lower prices, and it will not be able to get the revenues of selling its oil at the time it wants.
After the nuclear deal, Iran’s oil production rose to about 4 million barrels per day, of which almost 2.5 million barrels were exported, and the rest was used for domestic consumption and economic and financial corruption. Despite this rise, crises and economic and living problems continued. With the beginning of sanctions, Iranian oil exports fell to 1.5 million barrels per day. After the new US decision, this figure will be much lower. Although it is not possible to confirm whether Iran’s oil exports will reach zero, but even if Tehran managed to sell part of its oil, it will face a major challenge in collecting funds. Iran must also cut its oil prices to encourage buyers to venture and defy US sanctions, which would not be much fruitful to Tehran.
At the domestic level, these sanctions will have major negative implications that could threaten the survival of the regime. The Iranian economy is suffering from major crises including corruption, money laundering, mismanagement and wasting hundreds of billions in expansionist and ideological projects outside Iran and that have had a very negative impact on the Iranian interior and citizens’ lives. With the low government budget following the low oil exports, things will be much worse and would exacerbate the poor conditions that triggered popular protests in more than 100 Iranian cities last year, in which the demonstrators shouted slogans against Supreme Leader Ali Khamenei and the Iranian government and demanded the overthrow of the Wali al-Faqih regime.
The US insistence on preventing Iran from exporting its oil is only part of a wider American sanctions against Iran, which will have a major impact on the Iranian interior. It is expected according to many international reports that the growth of the Iranian economy in 2019 to be minus 6%, after reaching minus 4% last year, and the unemployment rate will rise to more than 30% in some cities of Iran while inflation might exceed 40%. This will further exacerbate the internal conditions to the extent that force the Iranian peoples to announce a popular uprising against the current regime.
Al Mezmaah Studies & Research Centre
April 28, 2019