Reuters: Iran‘s Oil Revenue Plummets

Rachel Shabad — June 12, 2012 – 4:56 pm | Barack Obama | Foreign Policy | Iran Comments (0) Add a comment

Reuters reported today that Iran’s oil revenue is plummeting because of the international sanctions effort led by President Barack Obama. According to Reuters:

Iran’s state finances have come under unprecedented pressure and the resilience of ordinary people is being tested by soaring inflation as oil income plummets due to tightening Western sanctions and sharply falling oil prices.

Tough financial measures imposed by Washington and Brussels have made it ever more difficult to pay for and ship oil from Iran. Its oil output has sunk to the lowest in 20 years, cutting revenue that is vital to fund a sprawling state apparatus.

Already down by more than a quarter, or about 600,000 barrels per day, from rates of 2.2 million bpd last year, shipments of crude oil from Iran are expected to drop further when a European Union oil embargo takes effect on July 1.

Tehran is already estimated to have lost more than $10 billion in oil revenues this year.

Causing even more pain, oil prices fell below $100 a barrel last week to a 16-month low amid a darkening outlook for economies in Europe, the United States and China.

‘This is an act of economic warfare. The sanctions are having a big effect in cumulative terms: Iran is being locked out of the global financial system,’ said Mehdi Varzi, a former official at the National Iranian Oil Co….

Senior Iranian oil officials have acknowledged that sanctions have reduced exports but say the country has long experience of finding ways around them and a drop in oil revenue is not the end of the world.

And:

Inflation is now officially running at about 20 percent, although economists say prices of the goods most Iranians worry about are rising much faster.

The country is undergoing what the government has called major economic surgery, in the form of cuts to the multi-billion dollar subsidies which for years have held down the price of essential goods such as fuel and food.

The value of the rial began to slip in January and traded at around 20,000 rials per dollar in February, up from 10,500 rials in December. It now stands at around 17,800 rials at market rates while the official rate is 12,260 rials to dollar. 

On the export front, several big European companies have halted purchases of Iranian oil and others are winding down.

Iran had hoped that energy-hungry China and India, both major customers, would mop up much of the oil left homeless by European clients. That may not be the case.

 

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