Thursday, September 6, 2012

Iran may be successfully smuggling oil, avoiding customs

Iran's oil output hit a new low recently as sanctions, particularly those from the EU took hold. The chart below points to an unprecedented collapse in production. And it is estimated that Iran's oil exports are now down some 66% YoY.

Iran's crude oil production (Bloomberg/OPEC; unit = 1000 barrels/day)

But are the official export numbers right or is Iran finding ways to get around the sanctions? According to Bloomberg, Iran's tanker fleet is now on the move. Since February Iran's tankers have been used for storage of excess oil that could not be sold into the market because of the sanctions. These ships were kept stationary. But now Iranian crude carriers seem to be on the move.
Bloomberg: - Iran’s tanker fleet is the busiest since February as fewer vessels store unsold oil at sea and more switch to transporting cargoes that most crude carriers are barred from hauling, said EA Gibson Shipbrokers Ltd.

The number of very large crude carriers operated by Tehran- based NITC in use for floating storage fell to 10 by the end of August, Steve Christy, director at London-based Gibson, said by phone today. That was a six-month low, he said.

More of these ships are being used to move crude sales into the international market, rather than to store unsold cargoes in the Middle East region, which is what was happening in 2010,” Christy said.
This seems to indicate that in spite of the official export numbers hitting new lows, Iran may be successfully bypassing customs registration and smuggling crude to some buyers - likely at a discount to the market. Of course Iranian authorities and companies would never admit to the part about the discount. The smuggling part however is another story. Iran has recently all but admitted to smuggling, and may now be in fact using this "export" capability as a propaganda tool.
Tehran Times: - ... Oil Minister Rostam Qasemi said that although the West has imposed sanctions on Iran’s oil sector with the goal of toppling the Islamic establishment, the country’s oil exports will never be halted because oil consuming countries need Iranian crude.

There are many ways to easily sell oil, one of which is to take advantage of businessmen and the private sector,” Qasemi added.
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