Category Archives: economics
Sanctions against Iran’s nuclear program curbed Iranian oil exports by 46 percent
PHOENIX, Aug 16, 2015 – The U.S. Congress will soon either approve or reject the just completed Iran nuclear deal. In selling the agreement to Congress, President Obama identifies the deterrent effect against cheating as “If Iran violates the deal, sanctions can be snapped back into place.”
On Friday, 2016 presidential hopeful Hillary Clinton described the sanctions against Iran’s nuclear program that she herself crafted when Secretary of State as “the most crippling sanctions in history”.
What, exactly, does that mean? How much of a deterrent against cheating are renewed sanctions? Those questions can be partially answered in a report on the effects of sanctions on Iran’s oil production released by the U.S. Energy Information Administration on August 13th.
The EIA purpose is not political. It describes how lifting sanctions will affect global oil production and prices. An unintended result is it quantifies the real effect of sanctions on Iran’s oil production, something you rarely get from politicians.
The timeline graph above shows Iranian oil production before sanctions, during sanctions and forecasts what production will be after sanctions. Milestone events are marked, starting with the Hillary Clinton engineered U.S. sanctions in late 2011 near the end of her tenure as Secretary of State.
At the beginning of 2011, Iran’s oil production was 3.7 million barrels/day (Mb/d). By the end of 2011 when U.S. imposed sanctions started, Iran’s production had already fallen to just below 3.5 Mb/d. After sanctions started, production dropped to 2.7 Mb/d over the next 6 months.
The sanctions reduced Iran’s overall oil production by only 25 percent, or 0.8 Mb/d from before sanctions.
On June 24 the EIA reported that sanctions reduced Iran’s oil exports from 2.6 Mb/d to 1.4 Mb/d. That’s a 46 percent reduction in exports.
Iran’s oil production got a boost of 0.2 Mb/d in 2014 after an interim agreement was signed in late 2013.
After the nuclear deal is implemented EIA forecasts that production will again return to 3.5 Mb/d, the same amount it was at the time sanctions were imposed.
If sanctions affecting Iranian oil production are representative of all the sanctions then their deterrent effect against cheating are stiff but perhaps not enough to stop a determined Iran from building nuclear weapons.
Sanctions weren’t enough to stop North Korea. North Korea simply decided one day to lock out international inspectors and went forward building and testing nuclear weapons while, at the same time, perfecting an ICBM that can strike anywhere in the world.
More than likely, releasing frozen assets variously reported from $50 billion to $150 billion and resumption of normalized trade is Iran’s greater goal for having an agreement. Companies all over the world are anxious to tap into Iran’s $400 billion economy.
Once Iran has the funds in hand and trade has resumed then the threat of renewed sanctions will have a much weaker deterrent effect against cheating than politicians claim.