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Sanctions Hit Iran Hard

It is too soon to tell if sanctions against Iran will lead to a peaceful end to its nuclear program, but it is not too soon to acknowledge progress Washington’s economic battle against Tehran. Every week, it seems, a success story pops up in the news: Japan, China, South Africa, and India have all agreed to lower their dependence on Iranian oil, the EU has agreed to stop buying Iranian oil (effective July 1), international insurance companies have agreed to stop insuring Iranian tankers (also effective July 1), banks have stopped doing business with Iranian financial institutions: the list goes on and on. Sure, Iran still has customers and can find creative ways to evade sanctions, but they’re having a measurable effect on Iran’s oil industry, as the NYT reports:

Iranian oil production, the backbone of the Islamic republic’s economy, fell by 12 percent in the first three months of the year and is likely to fall even more, industry experts say, as sanctions make it increasingly hard for the country to find markets for its crude.

The decline, documented in a May report by the Organization of the Petroleum Exporting Countries, is sharply at odds with statistics provided by Iran’s Oil Ministry that register no significant change in output over the past year. But it is accelerating so fast that if current trends continue, Iran could lose its position as the second-largest crude oil producer in OPEC to Iraq by June 2013, the organization’s statistics show.

Without customers, Iran has resorted to storing oil on a growing fleet of supertankers anchored in the Persian Gulf, instead of slowing down production, due to the fact that turning off the taps can do permanent damage to an oil well:

“Closing off valves sounds easy,” Mr. Zandi [an oil specialist writing for Shargh, a newspaper that is critical of the government.] said, but the consequences can be extremely damaging. “Technically it wrecks the oil wells, and we will never be able to bring their output back to previous levels.”

High oil prices and Iran’s remaining customers are so far keeping the Iranian government in business. The nuclear program also continues, according to the IAEA. But sanctions are a long-term game. They aren’t going away and will only get tighter as time goes on. Nobody knows where this is headed, but the steadily tightening web of sanctions, and the very real pressure they are bringing on the Supreme Leader, represent the world’s best hope of avoiding yet another destructive and dangerous conflict in the Middle East.

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  • Cunctator

    And meanwhile we read, almost daily, of reports that the Iranian nuclear programme is progressing toward its goal of a bomb. The purpose behind the imposition of the oil sanctions is no closer to being achieved than it was a year ago. I think it is highly probable that we will be reading about how effective the sanctions were at damaging the Iranian economy even after Tehran detonates a nuclear device.

  • thibaud

    Sanctions likely won’t dissuade the Iranian leadership. They’ll continue the program underground, and Western leaders will pretend that the program has stopped when it fact it’s continuing.

    This is likely because no Persian leader, be he religious or secular, regal or democratic, excitable or coldly calculating, will give up the drive for nuclear weapons capability. It’s in their view an essential attribute of regional hegemony, which in the Persian self-image is less an aspiration than a self-evident fact.

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