Can One Million Barrels in Oil Exports Help Tehran Survive Fierce Sanctions?

Can One Million Barrels in Oil Exports Help Tehran Survive Fierce Sanctions?

Wednesday, 7 November, 2018 - 11:30
A gas flare on an oil production platform in the Soroush oil fields | Reuters
Tehran- Faraz Safaei
Overlooking the nature of oil-dependent Iranian economy, Tehran officials stuck with downplaying US renewed sanctions set out to substantially cut the country’s oil exports, saying it wouldn't cause a major problem.

Iranian MP and head of the parliamentary economic committee Ezatollah Yousefian Molla said a week ago that sanctions “did not leave a significant impact on the national budget,” that needs no more than a million barrels per day to break even.

At first, Iranian officials' statements may sound reasonable given that oil revenues account for less than 25 percent of the public budget set at an approximate $ 27.4 billion.

If Iran’s national budget was planned based on a $55 oil barrels, it means that the government needs to export at least 104 million barrels per day to balance the general budget and deficit for this fiscal year, which matures in March 2019.

If Iran manages to export 1 million barrels during the upcoming fiscal year at today’s oil rates, $ 72 per barrel, it would make a safe $ 26.28 billion in oil exports, setting the country on a pretty much stable course.

Saying that national oil export revenues do not exceed 26%, Iranian officials fail to mention that the share is exclusive to crude only and does not cover oil derivatives, gas, and refined oil and energy sector taxes.

According to a report released by research bodies in parliament, revenues brought home by other divisions of the energy sector account to 60 percent of the general budget, meaning that the whole left embargos facing Iran today cannot be filled by simply exporting one million barrels of oil a day.

Even if Iran exports one million barrels of oil, the money generated by these exports will not find an easy way to enter Iran.

Iranian studies show that the cost of money transactions shot up to 20 percent deductible from the transferred amount in the previous wave of sanctions, given the stern US measures affecting Iran’s banking infrastructure.

However, the government can rely on managing the public budget by one million barrels of oil exports per day if several almost impossible conditions are met.

Iranian economist Hossein Raghever said oil rates must remain above $80 a barrel and joined by a host of alternative income sources, such as increased taxes or foreign investment, to balance a sanctioned Iran today.

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