Tag Archives: Sanctions

Update: No “Geneva bump” for Iran after EU insurance ban lifted

A few weeks ago I blogged about what the six-month suspension of the EU insurance ban could mean for Iran’s oil exports. My reading of events was optimistic for Tehran. India looked like the country best positioned to increase oil imports because it was never able to develop an alternative arrangement. Imports fell dramatically as a result. Other, more marginal barrels could be headed for Turkey, officials also said. “For Iran, every barrel is significant,” I argued on January 17. But it’s looking more and more like the “Geneva bump” will not materialize.

EU-based insurers issued a series of warnings last month, calling for caution. Gard AS of Norway–the largest protection and indemnity (P&I) insurer–had this to say: “Members and clubs should proceed on the basis that beyond 20 July 2014, clubs will not be able to respond to any claims presented in respect of liabilities arising during the 20 January/20 July suspension period… This has the effect of rendering the current suspension of sanctions on insurance cover, and in particular P&I cover, of very limited, if any, value to shipowners.”

Testifying today at a Senate Foreign Relations Committee hearing, Treasury Undersecretary David S. Cohen confirmed that all insurance claims, “from contract to delivery to payment,” must be settled by July 20. P&I claims regularly take a year or more to collect, process and pay out. This is understandable given that huge amounts of money involved. However, for Iran, it means selling more oil won’t be easy. Without EU insurance, tanker owners will be left on the hook to pay for any accident, damage or disaster. We will still see month-to-month variations in Iran’s oil exports but a sustained boost is hard to imagine without EU insurance.

In my January 17 post, I also suggested China might decide to import more oil from Iran it sees P5+1 talks going in the right direction. Chinese imports climbed in the last two months of 2013 but it’s too soon to tell whether or not Beijing is really rolling the dice–and daring the U.S. Treasury to act if talks with Iran fail.

Negotiations for a comprehensive, final nuclear deal will begin on February 18.

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Post-Geneva Oil Prospects for Iran

In keeping with the Geneva deal, the EU ban on insurance (and reinsurance) of Iranian crude oil will be lifted for six months beginning on January 20. As a result, some customers may import more Iranian oil. China could also surprise the U.S. and buy more Iranian crude if talks between Iran and the P5+1 go well. How much more is anyone’s guess but Iran will view any improvement as significant.

The EU ban helped slash Iran’s oil exports from about 2.3 million b/d to an average of 1.1 million b/d over the last 18 months. It exacted the most pain in the summer of 2012, when it first went into effect. Many of Iran’s customers were caught unprepared and had to scramble for alternatives. Iranian oil exports collapsed in July of that year, falling to a shocking low of about 850,000 b/d.

So what does the suspension of the EU ban mean for Iran’s customers?  That depends. Japan is currently the only country providing a “sovereign guarantee” in case of disaster. Tokyo is on the hook for up to $7.6 billion in the event an Iranian tanker is damaged or blamed for an environmental disaster. It will be happy to see EU insurers step in soon. Import volumes will not be affected, according to recent reports.

India stands to be the biggest winner because it never found an alternative to the EU. Some refiners could not accept Iranian-based insurance and a sovereign guarantee never materialized. As recently as December, Indian imports from Iran were in doubt.

Indian imports from Iran fell 40 percent in the first nine months of last year after EU firms refused to insure facilities processing Iranian oil—not just tankers carrying it. Deadly fires at two different facilities, one in May and another in August, forced Hindustan Petroleum to play it safe and cut off Iran. MRPL didn’t accept Iranian insurance until late summer. Essar Oil Ltd., another major Indian refiner, accepted Iranian insurance earlier but Iran still lost about 150,000 b/d in sales last year compared to 2012.

India’s steep drop-off of crude imports from Iran may be used as an excuse to ratchet up imports this year. Though India received a new sanctions waiver from the U.S. in November, the argument can and will be made that reductions were so severe in 2013 that the U.S. should be more understanding in 2014. Total imports may be lower than previous periods but the suspension of the EU ban will allow Indian refiners to achieve more “normal” volumes, at least for six months while the Geneva deal is observed.

Chinese officials were tight-lipped throughout 2012 but supposedly accepted Iranian insurance. This was a gamble given that Iranian-based insurers like Kish P&I were unproven. The risk was easier for Beijing to shoulder because it could presumably pay for any disaster if Iran failed to do so, thus creating a backstop sovereign guarantee for oil imports. For China—Iran’s number one customer—replacing all or most Iranian oil was not an option. Imports averaged about 420,000 b/d in 2012-2013. Volumes so large are not easily replaced.

Like China, South Korea accepted Iranian insurance in October 2012. Turkey, which has averaged about 105,000 b/d going back more than a year, never officially acknowledged how it is insuring Iranian imports. Japan took a different route with its sovereign guarantee of $7.6 billion. Those that took Iranian insurance accepted much smaller offers of $1 billion per tanker, per disaster. Iran’s national tanker fleet has a good record of safe carriage, however, allowing some to settle for less without fearing the worst.

The EIA says Iran’s oil exports are “not expected to increase significantly.” That’s fair. But how would Iran define “significantly”? Turkish Energy Minister Taner Yildiz said his country might take 35,000 b/d more now that EU insurance is an option; Indian officials say refiners could import an extra 50,000 b/d through March, maybe more if Iran is ready to agree to better terms. Privately-owned companies could still push the envelope.

While Japan and South Korea have slashed imports hard and fast, China could play chicken with the U.S. Treasury if Beijing believes P5+1 talks with Iran will succeed. China received a new waiver in November although imports from Iran were stable compared to the previous 180-day review period. Knowing there is a one-month delay between imports and the release of customs data, China cut imports from Iran to just 250,000 b/d in October. The sharp decline was reported just before the U.S. extended waivers in late November. The following month, China revealed November imports from Iran had jumped to 538,000 b/d.

The White House has played nice with China so far. Will China return the favor or go after cheap Iranian barrels? The possibility can’t be dismissed. Zhuhai Zhenrong, a Chinese state-owned trader, was sanctioned in 2012 for its relationship with Iran. But it remains less vulnerable because it has little or no exposure to the U.S. financial system. Last month, a former trader from the company asked Reuters, “More pressure? Do you think they [Zhuhai Zhenrong] really care?”

Combined, China’s Unipec and Zhuhai Zhenrong are contracted to purchase 505,000 b/d from Iran this year—about 85,000 b/d more than the imported average over the past two years. What they actually lift is up to their discretion but it could be influenced by ongoing talks.

The Geneva deal holds that Iran’s customers will be allowed to import “current average amounts” of 1 million b/d total. But that depends on enforcement. Some, like Turkey and India, may try to recover lost crude and satisfy existing contracts. China could use the Geneva deal and its seat at the P5+1 talks to as a guide for imports as well. It might even bet on a breakthrough and buy more oil.

Iran, for its part, should be expected to pursue any and all angles to increase exports, even if that means serious discounts or extended credit terms to begin retaking its market share.

For Iran, every barrel is significant.

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Two New Articles on Iran Sanctions in 2012-2013

For me, this year ended just like it began: writing about Iran, its oil wealth, and sanctions designed to curb Tehran’s nuclear pursuits. I have two more articles to share from this week:

The first article is a review of the past year. It can be found at TheRiskyShift.com, an international relations blog with a European bent based out of the U.S. and U.K. This article, titled “Iran Sanctions: Effective But Unsuccessful In 2012,” sorts through the assumptions built into this year’s sanctions. It also details how much Iran lost in 2012 and hints at 2013 being much tougher on the country’s economy. It’s a good review for those in need of a brief and sober assessment with essential numbers like revenues lost and diminished exports.

The second article, published today by the Middle East Policy Council, explores a topic I paid special attention to earlier this month, when a U.S. Treasury official laid out new sanctions slated for February 6, 2013. This measure (see my review here) will effectively lock up Iran’s oil revenues in countries that it maintains huge trade deficits with. Taking this prospect a step further, my new briefing for MEPC details how this will affect Iran’s relationship with India and other major trading partners. It’s titled, “Sanctions and Iran’s Trade Deficit.” Be sure to read it.

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U.S. Treasury–not the Pentagon–Takes Lead Against Iran

I’ve talked a lot about sanctions and Iranian oil this year. My first article was published in January by Foreign Policy. Since then, I’ve written two surveys for PBS’s Tehran Bureau (in May and September); blogged about different issues related to sanctions here, here, and here; and written two briefs for the Middle East Policy Council in February and April. Last month, I blogged about the likelihood of Iran’s top customers receiving new sanction waivers as a reward for reducing imports, and according Reuters, my prediction should be proven correct in the coming days—maybe even today.

For those interested: I’d like to draw your attention to remarks made yesterday by Treasury Under Secretary David Cohen, who is responsible for Terrorism and Financial Intelligence (see: bio). Cohen has been the most articulate defender and a gifted explainer of sanctions since he was appointed in mid-2011. Anyone interested in Iran’s current predicament should absolutely make a point of reviewing his public comments—both old and new.

Yesterday, he spoke at the Foundation for Defense of Democracies, a conservative Washington think tank that pushes aggressively for tougher action against Iran, and his comments focused mainly on Iran. With brevity, he laid out exactly how sanctions have been ratcheted up these past few years. He was also careful to point out that the U.S. still has options. Particular emphasis was placed on one measure—slated for February—that could dramatically curb Iran’s ability to spend and move money earned by oil sales. As Cohen notes, this move “represents perhaps the most dramatic escalation of financial pressure to date.” Here is the direct quote:

Under the new law, as of February 6, 2013 – two months from today – any bank in a country that has received a “significant reduction” determination [i.e. waiver] that is conducting a transaction with the Central Bank of Iran, or a transaction involving the sale of Iranian oil, can avoid sanctions risk only if it makes its payment into an account at a bank within the country that is purchasing the Iranian oil, and only if those funds are used to facilitate non-sanctionable, bilateral trade between that country and Iran.

Let me repeat this, because it is complicated – but critically important.

Even with the reduced sanctions exposure provided by a significant reduction determination, a foreign bank involved in the payment for Iranian oil must ensure that the payment goes to an account at a bank within the country importing the oil, and then is used only to facilitate permissible trade between that country and Iran, in order to avoid the risk of being cut off from the US financial system.

The funds can’t be transferred to a third country; can’t be repatriated to Iran; and can’t be used to facilitate third-country trade.

This is a very powerful sanction. Virtually all countries that purchase oil from Iran run a significant trade deficit – meaning, the value of their oil imports from Iran is greater than the value of their exports to Iran. As a result, this provision should “lock up” a substantial portion of Iran’s earnings in each of these countries.

As foreign financial institutions will no longer be able to transfer Iran’s oil earnings beyond their country’s borders without the fear of losing their access to the U.S. financial system, Iran will be severely limited in its ability to transfer funds across jurisdictions. Iran’s oil revenues will largely be shackled within a given country and only useable to purchase goods from that country.

You should probably reread this quote. I did. Cohen is talking about forcing Iran to buy goods directly from countries that it sells oil to because it will not be able to move money. Even if countries that buy oil receive sanction waivers, the money will be “shackled,” to borrow Cohen’s term. Iran would much rather trade oil for dollars or euros in order to buoy its own currency like other countries. Instead, they’ll acquire less reliable currencies, and they’ll have to buy goods and services originating in customer countries. And any bank that transfers the money—and has exposure to the U.S. financial system—will be blacklisted as punishment.

To a far lesser extent, Iran has already faced this inconvenience: almost half of Iran’s oil trade with India is said to be conditioned on Iran purchasing goods from India. There is also reason to believe that some Chinese goods are now purchased with oil revenues. To say that this arrangement is less than optimal is an understatement. Doing business with Iran is already a hassle for many customers. Iran would also benefit greatly from gaining access to harder currencies, although, in recent weeks, the rial has recovered somewhat from record lows seen in October.

Those foreign banks with zero exposure to the U.S. financial system can still enable Iran. We should expect Treasury to name and shame them regardless. But the vast majority will have no choice but to restrict Iranian payments like never before and halt transfers altogether. While the severity of this measure could be overstated, and we won’t know it’s real effect for months, it is still a significant development. It also underscores that the U.S. still has financial “options on the table,” and not just military options.

Read the transcript of Cohen’s prepared remarks: http://www.treasury.gov/press-center/press-releases/Pages/tg1790.aspx

And watch the video from the event. An off-the-record question and answer session starts at the 23-minute mark, with a question about humanitarian conditions in Iran: http://www.c-spanvideo.org/program/Coheno&showFullAbstract=1

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Iran’s Top Customers Will Get New Waivers After Cutting Imports

It’s that time of year again. Next month President Obama will decide whether or not Iran’s top customers deserve new 180-day sanction waivers as a reward for reducing imports of Iranian crude. The punishment, under U.S. law, is severe for many companies: those that refuse to cut imports will be blacklisted by the U.S. financial system. Iran’s top customers include China, India, Japan, South Korea and Turkey. Together these five countries imported nearly all of Iran’s 1.3 million b/d in crude exports last month.

There is no magic number for reductions. 15-18 percent seems like a reasonable estimate, however, judging by the last round of waivers which were issued in June. Also keep in mind that the sanctions are flexible. The President, if he so chooses, can extend waivers based on the undefined pretext of “national interest,” instead of hard reductions. The White House might still want to see some reductions but the bar is lowered by this option. Think of it as the “escape hatch” clause that allows the White House to avoid a confrontation with a heavyweight like China.

This post breaks down what each country should expect to hear from the White House in December. It seems likely that most if not all of Iran’s customers will be granted extensions.

China. This may surprise some but Iran’s number one customer has a good chance of getting a new waiver. Why? Because it has reduced imports even though Beijing rejects U.S. sanctions in principle and is contracted to purchase over 500,000 b/d from Iran through March. Customs data shows China imported only 454,500 b/d in July and less than 400,000 b/d in August and September. In October, imports of Iranian crude fell short again but climbed to 458,000 b/d. Earlier this year, Beijing and Washington cited reductions in China’s first quarter purchases as just cause for the June waiver. This was due to a contract dispute—not a deliberate cutback—and it’s worth restating that China would have bought more oil from Iran if given the chance.

Imports are down again in the second half of this year for two reasons. First, Sinopec—China and Asia’s largest refiner—suspended some imports from Iran for two months because of a refinery overhaul. Second, and most importantly, Iran has failed to satisfy its contract in recent months because its national shipping company is under terrible stress. It is now solely responsible for shipping crude to China. Other companies have abandoned Iranian ports because sanctions prevented them from securing insurance or payment. This means China has to rely on a much smaller and less reliable fleet than before. If this problem persists, Beijing might ultimately extend sovereign insurance guarantees to tankers that carry Iranian crude, meaning the government would insure vessels. But there is no chance that imports will recover before the White House makes its final decision on December 25.

India. In the month leading up to sanctions, India imported about 346,600 b/d. Since then, imports have hovered around 200,000 b/d. Industry sources say refiners expect imports to remain low through March. The Indian government has asked state-owned refiners to cut imports by about 15 percent and it seems likely that privately-owned refiners will exercise caution as 2012 comes to a close. India’s HPCL-Mittal Energy Ltd. (HMEL) imported 180,000 b/d in October alone but is not planning to buy from Iran again until after India receives a second waiver.

South Korea. South Korea will probably get a U.S. waiver because EU sanctions forced it to completely halt imports from Iran in August and September. Imports rebounded last month to 186,500 b/d after Korean refiners accepted insurance from Iranian sources (although they were expected to jump as high as 260,000 b/d in order to make up for the two previous months). Overall, imports are on pace to fall by about one-third compared to last year and will be down significantly compared to the first half of 2012.

One anonymous South Korean source recently told Reuters: “The cut in our Iranian crude oil imports this year is expected to be much larger than the 20-percent level targeted to ensure we received a U.S. sanction waiver earlier this year.” Seoul and Washington have cooperated closely on sanctions since the beginning. Given this closeness and the dramatic reduction in South Korea’s imports, a second waiver is virtually guaranteed.

Turkey. Turkish imports from Iran have been wildly inconsistent this year. Some months the Turks flirted with record highs and at other times imports dropped off almost entirely, surging to 250,000 b/d in April and falling below 50,000 b/d in July. Target volumes are said to stand at about 182,000 b/d but imports in the second half of 2012 are closer to 150,000 b/d. This should be good enough for a waiver—but Tupras, Turkey’s sole refiner, has not yet made October data available. Officials remain committed to reductions although they seem to be walking a fine line with only a few weeks to go. Last month, Turkish Energy Minister Taner Yildiz told reporters he expected Turkey will get a second waiver.

Japan. Tokyo’s waiver was renewed in September meaning the White House will not have to decide what to do about Japan until March. As of today, a March 2013 waiver seems very likely. One of America’s closest allies began this year by importing almost 350,000 b/d from Iran. It has since cut back significantly. In July, imports were halted totally, while Japan’s parliament negotiated a sovereign reinsurance scheme that would allow non-Iranian shippers to transport crude with sufficient coverage. Imports returned in August but remained below the 200,000 b/d mark through September. Cuts could come easier in the future by conservation efforts and the use of crude alternatives like natural gas or coal.

Cuts alone could probably secure a waiver for Japan. But a case can also be made that the U.S. should be sympathetic to Tokyo because of exceptional circumstances. Last year, the Fukushima disaster forced Japan to reconsider nuclear energy and rely instead on imported oil and natural gas for electricity generation. That should be reason enough to invoke the “escape hatch” clause.

I am under the impression that 180-day waivers are extended based on reductions made during the previous 180-day period. Next month, President Obama will make what looks like an easy decision: he will almost certainly extend waivers for China, India, South Korea and Turkey because each country has cut back since July for a variety of reasons. In March, Japan should receive another extension. But beyond that, it will become increasingly difficult for the White House to demand cuts again and again and again.

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Bitter Carrots, Weak Sticks

Iran is under more pressure than ever to come clean on its nuclear program. Sanctions adopted in summer have slashed the country’s oil exports by more than half; new sanctions adopted by the EU on Monday went even further, significantly curbing Iran’s access to financial markets in Europe. As a result, revenues are drying up, Iran’s isolation is increasing, and the currency is losing value rapidly. A genuine economic crisis is unfolding. Western powers hope that sanctions will force Iran’s leaders to admit or convincingly disprove that the country is pursuing nuclear weapons.

At the same time, the U.S. and its allies are showcasing their military capabilities in the Gulf, not far from Iran’s shores. The purpose is clear. First, drills aim to deter Iran from trying to close the Strait of Hormuz, which officials have threatened to do several times. And second, deployments seek to make the implicit threat of military intervention more credible. Earlier this year, more sophisticated systems—including stealth fighter jets and anti-mine vessels—were deployed to the Gulf; in September, the U.S. hosted a high-profile mine-clearing drill with several friendly countries; and, just this month, the U.S. and Israel began a three-week anti-missile drill involving thousands of personnel and live-fire exercises.

The only “off-ramp” available to Tehran is capitulation. The reward—or “carrot”—is sanctions relief. And although the White House recently pushed back against Israeli insistence on setting clear “red lines” that would trigger military action, President Obama believes that an Iranian nuclear bomb is unacceptable, and that “every option is on the table.” His Republican challenger, Mitt Romney, believes that Iran will get the message once he deploys more forces to the region. Both candidates claim the use of force—or the “stick”—is an option.

Recent events and the condition of Iran’s economy might suggest that the carrots are getting sweeter for Iran and that the stick is intimidating. But there is no sign of Tehran backing down. In fact, there’s reason to believe that the carrots being offered are still too bitter and that the stick appears weak.

Let’s start with how Iranian officials frame sanctions. Supreme Leader Ali Khamenei, who has final say over Iran’s nuclear program and foreign policy, insists that there is no linkage between sanctions and the nuclear program. According to Khamenei, Iran is being sanctioned because of its most basic religious and cultural qualities—not because of specific policies. He frequently reminds Iranians that the country has endured sanctions for decades.

On October 10, Khamenei told an audience in North Khorasan Province that, “Sanctions existed since the beginning [of the Islamic revolution]… Today our enemies, both America and some other European countries, linked sanctions to the nuclear energy issue. They lie… They claim that if the Iranian nation refuses nuclear energy the sanctions will be stopped. They lie.”

The popular response to Iran’s economic crisis is more revealing. President Mahmoud Ahmadinejad has become the scapegoat. Members of parliament and editorialists argue that his policies, especially subsidy reform, set Iran up for failure. Sanctions only exacerbated a bad situation by this logic. And so any shift in policy must be economic rather than nuclear. Ahmadinejad’s presidency ends next year but there’s no reason to believe that his successor will do any better, however, so long as sanctions are in place.

Beyond the halls of power, people in the streets are attacking the government. Earlier this month, when a sudden drop in the value of the rial inspired street protests in Tehran, protestors chanted various slogans, none of which involved sanctions. “Leave Syria alone! Think of us!” they yelled, begging the regime to fix Iran’s problems first rather than support Bashar al-Assad. “Death to the dictator!” others chanted. No one chanted “End domestic enrichment! Lift sanctions!” because the nuclear program remains popular inside Iran and the regime has consistently—perhaps even convincingly—argued that sanctions are nothing new.

U.S. officials have rightly avoided taking too much credit for the effectiveness of sanctions. This is wise, since celebrating a country’s misery is inappropriate when the currency is collapsing, and inflation is harming people who have no say in the nuclear program. What the U.S. has done instead is promote a narrative that encourages Iranians to blame their leaders for ruining the economy. This makes sense. But it also reinforces the impression that the U.S. wants regime change.

On October 3, Secretary of State Hillary Clinton had this to say: “They have made their own government decisions—having nothing to do with the sanctions—that have had an impact on the economic conditions inside the country… Of course the sanctions have had an impact as well, but those could be remedied in short order if the Iranian government were willing to work with the P5+1 and the rest of the international community in a sincere manner.” How might that message be interpreted in Tehran?

Khamenei remains steadfast in his rhetoric, while those in the streets and parliament are eager to blame the president for mismanagement. Meanwhile, the U.S. promises sanctions relief even though it diminishes their effect and blames Iran’s leaders. Capitulation seems possible only if the passing of time proves Ahmadinejad innocent and more Iranians recognize the connection between sanctions and the nuclear program. Until then, the carrots–or inducements–will remain too bitter, even if Iran desperately needs sanctions to be lifted.

That leaves the threat of military force as the only other means of changing minds in Iran. The problem with posturing, however, is timeless: shows of force are meant to convey a message. But that message doesn’t necessarily translate. At this point Iran might even be deaf to threats. For the last ten years, it has been bookended by hundreds of thousands of American troops, who were stationed in Iraq and Afghanistan. All the while, the U.S. presence in the Gulf remained constant, with the Fifth Fleet operating out of Bahrain, and representing what can only be described as the greatest military force in the region.

America’s presence is undeniable but its track record for responding to Iranian provocations is weak. The last time the U.S. engaged Iranian forces was in the late 1980s, when the U.S. defended maritime shipping in the Gulf at the height of the Iran-Iraq war, which led to Operations Nimble Archer and Praying Mantis. Iran’s navy was crippled in a matter of hours; two Iranian oil platforms were also destroyed as punishment. Since then, Iran has sponsored terrorism abroad including attacks that killed Americans, trained and equipped insurgents in Iraq and Afghanistan, and refused to address the possible military dimensions of its nuclear program in spite of multiple UN Security Council resolutions.

And after 10 years of thankless, grueling, expensive wars of occupation, fought to the east and west of Iran, it’s conceivable that Tehran feels immune to American threats, and assumes that the U.S. isn’t ready to commit force so soon. This may or may not be the case; we can’t pretend to know what the Supreme Leader is thinking. But when U.S. officials argue that the military option is “on the table,” we must remember that Tehran has been subject to implicit threats for years. Even President George W. Bush, who included Iran in his “Axis of Evil,” never used force.

It’s hard to have faith in the carrots and sticks approach right now. To be clear: this conclusion doesn’t legitimize military intervention. Violence communicates intent but—even though Iran’s nuclear program is advancing—IAEA safeguards remain in place, and most assessments hold that Iran is years away from nuclear weapons, if it ever decides to pursue one (right now the international community is worried about research activities with military applications). So there is still time for sanctions to work and no reason to act hastily given the high costs of intervention.

Might U.S. presidential candidates debate the Iran question in another four years?

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New Articles on Iran: Oil Sanctions and Saudi Relations

PBS Tehran Bureau and Inside Iran published my newest articles yesterday. The first, for PBS, is a comprehensive review of the impact of sanctions on Iran’s most vital industry. It is a follow-up to the survey I did in May, which I’m proud to say has held up very nicely. The update breaks down the contract terms and liftings made by Iran’s top customers, the legal and illegal schemes Iran has employed to avoid sanctions, and what arrangements have been adopted in order to keep oil flowing, albeit at a dramatically reduced rate. The entire article is worth reading (I hope) but one point deserves to be repeated:

Most fortunately for Tehran, dramatic export declines were offset by a surge in prices. Brent crude, which is used as a proxy for world oil prices, sold for $95.16 in June — but then jumped to $102.62 in July and $113.36 in August. Remember also that the terms of credit extended to Iran’s customers allow some to pay up to 60 days later. This means that Iran only began counting diminished revenues this month, since sanctions were locked in July 1. Iran’s leaders may not fully understand the impact of sanctions for weeks. It may take several more months for Tehran to seriously reconsider its nuclear posture, which sanctions aim to change.

Sanctions may be two months old but the Central Bank of Iran, which processes oil transactions and reports revenues to the government, is only now starting to gauge their impact. So anyone who suggests that sanctions have already failed because they haven’t worked should know that sanctions only took effect in September. Iran’s commitment to its controversial enrichment program has only just begun to be tested.

The second article for Inside Iran is a quick review of Saudi-Iranian relations in a time of revolution. As I argue, Saudi Arabia has gone on the offensive since revolutions started sweeping the region early last year. The country’s “advantage… [is] further guaranteed by its huge investments across the region and the large number of expats who live in the Kingdom. It continues to benefit from a reservoir of shared identity and Sunni tradition that remain off-limits to its Shi’a Persian rival.”

Riyadh’s multi-billion dollar aid packages factor into this equation as well. While it remains to be determined just how much influence can be purchased, at the very least, Saudi Arabia has used aid to kick-start relations with post-revolutionary governments. At the same time, the Saudis deserve some credit for extending help to struggling nations, since much of it will be spent on development projects (silos, water projects, etc.) that will improve conditions for average citizens. Riyadh is also depositing hard currency in central banks around the region in order to protect nations against crippling inflation. (Qatar has done the same.)

The final paragraph addresses the formality of relations between Iran and Saudi Arabia, which I often refer to as “professional courtesy.” I might build this idea up into a serious article since it’s an intriguing angle that receives so little attention:

In spite of deep mistrust, Saudi-Iranian relations—very much like American-Soviet relations during the Cold War—nevertheless retain an air of correctness. Media on both sides demonize the other while embassies conduct business and officials meet when necessary. Even after Iran was implicated in last year’s assassination plot, the embassies stayed open; Iranians filed for Hajj visas. Proximity demands at least some contact.

Blogging has suffered lately because I was writing for other outlets. I planned on writing a retrospective on last week’s protests–with the benefit of hindsight, of course–but Marc Lynch beat me to it with his superb post on “The Failure of #Muslimrage.” Read it.

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