Iran feels sanctions pain as oil income slumps

Discussion in 'Current Events' started by Margot, Jun 10, 2012.

  1. Margot

    Margot Account closed, not banned

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    This is a serious problem for Iran... and the outcome is unpredictable. A 38% loss in revenue is not chickenfeed.

    Iran feels sanctions pain as oil income slumps
    3:47pm IST
    * Iran may see 38 percent drop in oil revenue

    * IMF says Iran needs $117 oil to balance books

    * Resilience of ordinary people tested by soaring inflation

    http://in.reuters.com/article/2012/06/10/iran-oil-revenues-idINL5E8H78K120120610

    By Peg Mackey and Alex Lawler

    LONDON, June 10 (Reuters) - Iran's state finances have come under unprecedented pressure and the resilience of ordinary people is being tested by soaring inflation as oil income plummets due to tightening Western sanctions and sharply falling oil prices.

    Tough financial measures imposed by Washington and Brussels have made it ever more difficult to pay for and ship oil from Iran. Its oil output has sunk to the lowest in 20 years, cutting revenue that is vital to fund a sprawling state apparatus.

    Already down by more than a quarter, or about 600,000 barrels per day, from rates of 2.2 million bpd last year, shipments of crude oil from Iran are expected to drop further when a European Union oil embargo takes effect on July 1.

    Tehran is already estimated to have lost more than $10 billion in oil revenues this year.

    Causing even more pain, oil prices fell below $100 a barrel last week to a 16-month low amid a darkening outlook for economies in Europe, the United States and China.

    "This is an act of economic warfare. The sanctions are having a big effect in cumulative terms: Iran is being locked out of the global financial system," said Mehdi Varzi, a former official at the National Iranian Oil Co.

    "It does appear that Iran is more amenable to negotiations now than it was a year ago. The West should take advantage of this momentary situation to offer more meaningful concessions - a road map to where this will all end," said Varzi, now running an energy consultancy in Britain, Varzi Energy.

    Diplomats and analysts say Iran may offer the IAEA, the U.N. nuclear watchdog, increased cooperation as a bargaining chip in its negotiations with world powers, which resumed in April after a 15-month hiatus and are to continue in Moscow on June 18-19.

    Basic mathematics dictate that the lower Iran's oil exports, the higher the oil price it will need to stay in the black.

    According to the International Monetary Fund, Iran needs oil at $117 a barrel to balance its budget, set at $462 billion. President Mahmoud Ahmadinejad has said the budget was designed to decrease Iran's dependence on oil revenues.

    Senior Iranian oil officials have acknowledged that sanctions have reduced exports but say the country has long experience of finding ways around them and a drop in oil revenue is not the end of the world.

    "Personally, I will be very happy if the dependence of the economy on oil revenue is decreased," said an Iranian oil official, who requested anonymity. "We can use the sanctions as an opportunity".


    STRUCK BY SOARING PRICES

    International sanctions have been a fact of life in Iran for decades and Tehran is adept at working round them.

    But there are growing signs that ordinary people are feeling much more pain from them than in the past as inflation has soared in the last six months.

    "I was struck by the high prices when I went to the grocery store yesterday," said Ahmad, 54, who owns a small fabric shop in Tehran's bazaar.

    He said the price of apples had more than doubled in the past month and strawberries had almost tripled to 110,000 rials per kilo, or more than $6 at market rates.

    "Little by little, even fruit is becoming a luxury."

    Inflation is now officially running at about 20 percent, although economists say prices of the goods most Iranians worry about are rising much faster.

    The country is undergoing what the government has called major economic surgery, in the form of cuts to the multi-billion dollar subsidies which for years have held down the price of essential goods such as fuel and food.

    The value of the rial began to slip in January and traded at around 20,000 rials per dollar in February, up from 10,500 rials in December. It now stands at around 17,800 rials at market rates while the official rate is 12,260 rials to dollar.

    The price of petrol on the domestic market remains stable but taxi and public transport fares have gone up.

    Sanctions are also painfully reshaping flows of goods for small enterprises, with one owner of an import company in Tehran saying he was forced to fire some workers recently after being forced to source his purchases from China instead of Europe.

    "The shift caused a great deal of financial loss for us. I am not sure how much longer we can go on like this. We certainly will not be able to cope if financial sanctions on Iran intensify," the entrepreneur, who asked not be named, said.


    HOMELESS OIL

    On the export front, several big European companies have halted purchases of Iranian oil and others are winding down.

    Iran had hoped that energy-hungry China and India, both major customers, would mop up much of the oil left homeless by European clients. That may not be the case.

    "Our impression is that China and India have not been as helpful as the Iranians expected," said a senior Western oil executive, who declined to be identified.

    "But it's very difficult to get a clear picture of how much oil is moving because they are deliberately cutting off communication."

    Since early April, Tehran has been hiding the destination of its oil sales by switching off tracking systems on its tankers.

    But barrels counted upon arrival in Iran's top four customers - China, India, Japan and South Korea - show a 20 percent decrease, or 357,000 bpd, so far this year, according to government data and industry sources.

    That translates into a loss in revenue of roughly $35.7 million a day, or $4.3 billion in the first four months of this year, based on current Brent crude prices.

    Iranian crude is sold at a discount of several dollars per barrel to benchmark dated Brent, so the actual losses are likely to be even higher.

    Some relief has come from soaring prices earlier this year as Brent so far in 2012 is averaging $116 a barrel, up from 2011's $110, which was a record high. But reduced output and falling prices are making things worse very quickly.

    From July 1, Morgan Stanley expects Iranian exports to fall by a further 150,000 bpd while the International Energy Agency has said they could almost halve by 1 million bpd.

    That is putting Iran on course for a huge drop in oil revenues, while those of its rivals from the Organisation of the Petroleum Exporting Countries will hit a record.

    According to the London-based Centre for Global Energy Studies, the strong oil price has put OPEC on a path to earn $911 billion from oil exports this year.

    Iran - OPEC's second biggest producer - could see a 39 percent decrease this year to $44 billion, while Saudi Arabia is expected to see a $3 billion increase to $294 billion.

    Belt tightening may be needed for Iran to withstand lower oil prices and exports after the EU sanctions take full effect.

    "The only way around it will be for Iran to cut the budget, which has a lot of fat," said Varzi.
     
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  2. Margot

    Margot Account closed, not banned

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    http://www.thesun.co.uk/sol/homepag...oze-Man-U-towels-and-Union-Jack-knickers.html

    Iran has a huge population of young people and the government seems out of sync with them.

    excerpt:

    A short stroll away in Tehran’s bustling Grand Bazaar, women shoppers, in the all-covering black cloak-like chador and hijab, were looking for bargains.

    Surprisingly, Union Jack-patterned knickers and bra combos were on sale on at least three stalls. American stars and stripes underwear was also available in several shops.

    Another stall was selling Manchester United bath towels in a nation where Premier League games are eagerly viewed.

    One black-clad shopper in her 30s told me: “The underwear is very popular. We have nothing against your country.”

    The message that this risqué lingerie worn under the chadors sends out is clear: Knickers to the hardliners.
     
  3. Margot

    Margot Account closed, not banned

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    FYI.... two views of Iran...........
     
  4. Iron River

    Iron River Well-Known Member

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    I don't have a problem with the Iranian people for the most part but their leaders are insane and the normal people are controlled by an army of young ignorant islamist fools.

    Funny that Obama hasn't mentioned the impact that drilling for oil on private property here has had of Iran. He can never admit that a robust drilling industry in our country hurts the ME as oil speculation decreases and the price of oil falls.

    I would support a green tax on gasoline(after the price falls below$2.00 ) if the money went directly to build clean coal plants, nuclear plants, geothermal plants and new power lines.

    Cheap energy means freedom to grow our economy and let our middle class prosper.
     
  5. Margot

    Margot Account closed, not banned

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    There is plenty of market demand for Iranian oil.. The problem for Iran is that revenues are down 38% and they need a ppb of $117 to make ends meet.

    This may get very hairy when sanctions kick in on July 1...........
     
  6. waltky

    waltky Well-Known Member

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    Iran's Currency in Free Fall; Ahmadinejad Blames US...
    :p
    Iranian currency slides under latest U.S. sanctions
    Oct 2, 2012 - He cites 'psychological pressures,' but his critics aren't buying it
     
  7. waltky

    waltky Well-Known Member

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    Just like in No. Korea, the ruling elite don't suffer...
    :roll:
    Iran rulers eye currency mess from protected perch
    Oct 7, 12 -- Just as Iran's currency was rattling near bottom after a stunning free fall, officials in Tehran opened a trade exhibition that included advanced engineering tools, heavy machinery and robotics. Nearly every Iranian booth had some connection to the country's powerful Revolutionary Guard and the ruling system it safeguards.
     
  8. Margot

    Margot Account closed, not banned

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    But barrels counted upon arrival in Iran's top four customers - China, India, Japan and South Korea - show a 20 percent decrease, or 357,000 bpd, so far this year, according to government data and industry sources.

    That translates into a loss in revenue of roughly $35.7 million a day, or $4.3 billion in the first four months of this year, based on current Brent crude prices.

    Iranian crude is sold at a discount of several dollars per barrel to benchmark dated Brent, so the actual losses are likely to be even higher.


    In a nutshell.. Sanctions are working.

    http://in.reuters.com/article/2012/06/10/iran-oil-revenues-idINL5E8H78K120120610
     
  9. Margot

    Margot Account closed, not banned

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    Sanctions are working......
     
  10. kenrichaed

    kenrichaed Banned

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    Apparently, that's why they've given up their nuclear program.

    Oh wait....they haven't.

    lol

    Go Sanctions!

    Stupid liberals
     
  11. camp_steveo

    camp_steveo Well-Known Member

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  12. Margot

    Margot Account closed, not banned

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  13. camp_steveo

    camp_steveo Well-Known Member

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    I am referring to the lives of civilians, particularly children.
     
  14. Margot

    Margot Account closed, not banned

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    I agree........ but I don't want Egypt or Arabia to be forced into developing nuclear bombs.

    Israel is an obstacle to peace, but so is Iran.. with their funding Hamas, Hezbollah and the Al Houthis.
     
  15. waltky

    waltky Well-Known Member

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    Granny says, "Well den - guess it depends on who ya ask...
    :grandma:
    U.S. commander says Iran sanctions not working
    March 5th, 2013 - Severe sanctions against Iran are not working, the top U.S. commander in the Middle East says.
     

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