Iraq News - Local News - Baghdadpost

Iran faces crisis if oil exports reduced to zero

When it comes to the Trump administration’s policies on Iran, one of the core objectives is to reduce Tehran’s oil exports. In fact, the White House is planning to drive Iran’s crude exports to zero. This idea was first publicly announced last month by Secretary of State Mike Pompeo, who emphasized that the US had “made clear our seriousness of purpose: We are going to zero.”

The supporters of the Iran and critics of the Trump administration’s policies toward Tehran cast doubt on whether they can achieve such a goal. Not surprisingly, even the Iranian leaders believe that the US cannot succeed. According to the Mehr News Agency, Oil Minister Bijan Zanganeh recently said at an energy conference in Tehran that Washington would not be able to reduce Iran’s oil exports to zero.

Nevertheless, we should remember that the critics also previously argued that the US would be incapable of reducing Iran’s oil exports by withdrawing from the Joint Comprehensive Plan of Action (JCPOA), also known as the nuclear deal, and reimposing the primary and secondary sanctions that were lifted under the Obama administration. They believed that the EU’s reluctance to join the US would see Washington fail in its objective of pressuring the ruling clerics.

But, since Donald Trump withdrew from the nuclear deal, Iran’s oil revenues and exports have been steadily falling. Before the US took a tougher stance toward the Iran regime, it was exporting more than 2.5 million barrels per day (bpd). Iran’s oil exports have since dropped to approximately 1.1 million bpd — a decline of more than 50 percent.

The White House has shown itself to be committed and determined to exerting pressure until it brings Iran’s oil exports to zero; unless the regime changes its destructive and aggressive policies. For example, the US has recently ended the sanctions waivers that permitted eight countries — China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea — to purchase oil from Iran.

These developments beg the question of what will happen if Iran’s oil exports do indeed reach zero. To address this question, we first need to examine how much of Iran’s total exports are linked to the energy sector, and how much of the country’s budget is dependent on oil and natural gas exports.

Iran has the second-largest natural gas reserves and the fourth-largest proven crude oil reserves in the world, and the sale of these resources account for more than 80 percent of its export revenues. In addition, according to the most recent budget proposed by President Hassan Rouhani, roughly a third of Iran’s income was expected to come from exporting oil to other countries. Tehran was hoping to generate approximately $21 billion of oil revenues in the current financial year. This highlights the fact that Iran depends heavily on oil revenues to fund its spending.

If the Iranian regime was unable to export any oil or natural gas, it would be extremely difficult for the authorities to continue funding, sponsoring and supporting its militias, proxies and terror groups across the Middle East. The Iranian leaders would have to substantially cut or totally halt their financial assistance to groups such as the Houthis in Yemen, Shiite militias in Iraq, and Hezbollah. And when these militias do not receive the required funds to operate and advance Iran’s interests, some will begin to lose their power, disintegrate and even fall apart. Other militia groups will also start losing their loyalty to Iran and will likely attempt to find new paymasters.

According to the latest reports, Iran’s reduced oil revenues have already caused Tehran to cut funds to its militias in Syria. As Iran’s militants are not getting their salaries and benefits, it is becoming extremely difficult for them to continue fighting. A militant with an Iranian-backed militia in Syria told the New York Times: “The golden days are gone and will never return. Iran doesn’t have enough money to give us.”

Also feeling the pressure of sanctions on Iran, Hezbollah leader Hassan Nasrallah has called on his group’s fundraising arm “to provide the opportunity for jihad with money and also to help with this ongoing battle.”

Furthermore, it is worth noting that, although the unemployment rate is high in Iran, a large portion of those who have jobs work for the state. If the theocratic establishment loses its ability to generate adequate income, it will be forced to cut salaries or stop paying its employees altogether. When state employees do not receive their paychecks, they will likely begin to join the rest of the population in protesting against the government.

In summary, if Iran’s oil exports are reduced to zero, the regime will be less capable of sustaining its power, unless it fundamentally changes its domestic and foreign policies.
Read
Comments