Iran's latest challenge: Hiding the economic damage of Western sanctions
If Western sanctions were ineffective, as the Tehran Times would like us to believe, the governor of Iran's central bank would not need to liken sanctions to 'a military war.'
The Tehran Times found an interesting way on Monday to counter reports on the crippling effect of international sanctions on Iran’s economy: it quoted data published by the Japanese Ministry of Finance that show imports of Iranian oil to Japan growing by 60.5 percent last month.
Despite the sanctions, the paper said, Japan “refused to cease the purchase of the Islamic Republic’s crude over concerns regarding the likelihood of a surge in the imported oil prices and its subsequent negative effects on Japan’s economic development.” According to the report, Japan is sidestepping the ban on European companies insuring tankers laden with Iranian oil by providing its own state-guaranteed insurance coverage.
This seems to contradict other reports about a general dip in Iran’s oil exports to Japan and other major Asian nations, in some cases by as much as a third. One of these reports directly quotes officials of Japan’s largest buyer of Iranian oil, Showa Shell, acknowledging that the level of imports from Iran have fallen an average of 100,000 barrels per day to 60,000-70,000 daily. How can this discrepancy be explained?
Thankfully, Reuters’ extensive reporting on the international oil industry yields the answer, a detail that the Tehran Times failed to reveal. June indeed saw a major increase but that was just a last gasp. According to Reuters, “Iran’s crude exports to Japan likely stopped flowing this month after buyers halted loadings in early June to avoid running foul of the EU sanctions from July 1 that forbid European insurers from covering tankers carrying Iranian crude anywhere in the world.”
The other major oil producers, led by Saudi Arabia, Iran’s biggest regional rival, have increased production so that the price of crude has not risen dramatically in recent months; in fact, it is much lower than the peak of $110 a barrel just three months ago. Ironically, among the producers that have been profiting most from Iran’s slump are Russia and Venezuela, two of Iran’s few remaining allies.
The Tehran Times, as usual, tries to put a brave face on things, predicting the sanctions will cause more damage to the West than to Iran. Seyyed Davoud Selehi, Iran’s former ambassador to Spain, delivers this breathtaking prediction of how the sanctions will contribute to toppling the Spanish economy and, by extension, the entire Eurozone: “Spain’s commercial relations with Iran contributed significantly to its economy. The politically motivated decisions adopted by the EU have caused havoc for the Spanish economy. Changing such a politicized mindset is the only way to escape the economic tsunami; otherwise the Europeans, including the Spaniards, will be doomed to suffer the consequences.”
The truth is that the sanctions have seriously affected Iran’s oil-based economy. Otherwise, the governor of the country’s central bank, Mahmoud Bahmani, would not have told the official IRNA news agency on Tuesday that the sanctions are “no less than a military war.”
Iranian President Mahmoud Ahmadinejad tried to make light of the sanctions on Tuesday, while inaugurating a new unit at an oil refinery in Tehran. “It’s very funny. They (the West) use oil as a political weapon against a country that is an oil producer itself. This is among the most ridiculous behaviors,” he said.
But according to the Iranian news agency, he found it hard to hide his exasperation at the fact that oil prices are “based on the political situation instead of economic conditions. If not so, the real price of oil should have been very much higher in the market than what it is presently.”
And now the U.S. Senate and House of Representatives are preparing to vote on yet tougher sanctions, which will make it even harder for Iran to circumvent the restrictions and sell its oil. Little wonder that Iranian Foreign Minister Ali Akbar Salehi is urging the continuation of the failed P5+1 diplomatic process in the hope of alleviating the sanctions. Indeed, even the Islamic Revolutionary Guard Corps is toning down its rhetoric and saying it has no intention of blocking the Strait of Hormuz.