Those who doubt that the sanctions of US President Donald Trump on Iran will not hit its target should be carefully scrutinized again. Its direct impact on Iran's oil export revenues is likely to be small, but in the medium term, new US sanctions will make it harder for Iran to continue oil production, meet domestic demand, finance government institutions, and in the long run could have significant effects Devastating, and will make it almost impossible for Iran to maintain its current oil production.
Doubt
Observers immediately doubted that the new embargoes would produce good results, due to several reasons:
First, once the administration announced the new system, exemptions were granted to eight countries - including the largest importers of Iranian oil - including China, India, South Korea, Japan and Turkey. In 2017, these five countries bought 70% of Iran's crude oil and condensate exports. China, the signatory to the nuclear agreement, represents a quarter of the Iranian oil export market.
Second, unlike the exemptions, the European Union and other signatories to the Iranian nuclear agreement have declared that they will abide by the agreement as long as Iran continues to meet its conditions. The EU has also pledged compensation to European companies affected by US sanctions and is trying to create a "special purpose tool" to send payments to Iran. The tool will surpass the most widely used Swift system in the world, and this "tool" could make transactions between the EU and Iran unregulated by the United States.
The dilemma of companies
Despite these efforts, the extent to which trade between the EU and Iran will continue is not entirely clear as major European energy, shipping and insurance companies have announced they will suspend cooperation with Iran. For example, the Danish firm AB Muller Maersk announced on May 17 that it would suspend all its activities in Iran, the world's largest container ship operator, and also has large subsidiaries for oil and natural gas exploration, drilling and other services.
Even if Iran can easily overcome sanctions in the short term, the long-term picture is different. Iran is the fifth largest oil producer in the world, but depends on relatively mature fields for its production. These fields have high slope rates - and the decline is a measure of the annual decline in oil production to a level where it can not produce profitably - from 8 to 11 percent. Iranian fields also have relatively low recovery rates - recovery is the percentage of oil that can be recovered from a given field more than ever - ranging between 20 and 25 percent.
Foreign investment will not come
Prior to signing the nuclear agreement in 2015, there has been no new oil field in Iran since 2007. It is unlikely that Iran will be able to develop new fields at this time without foreign investment to do so. Even China, which may normally provide funding, faces problems.
If Iran can not develop new fields, the country will need to use the old fields better through the latest technology to improve oil recovery. But for the time being, Iran relies on old technologies, including pumping natural gas into old oilfields to produce ever-smaller amounts of oil. In fact, prior to the agreement, Iran reintroduced 12.4% of its total gas production into oil wells.
Over time, the injection of gas into wells will become less feasible. The consumption of domestic and commercial sectors and small industries of natural gas in Iran represents more than 50%, and consumption is increasing. 14% of natural gas production is for petrochemicals for export, such as ethylene and propylene, which form the basis for manufacturing plastics, fibers and other chemicals. Petrochemicals make up a large proportion of Iran's non-oil exports to China, and the increase is one of Iran's top priorities.
Brenda Schweira is a Fellow of the Truman Institute for Peace Research at the Hebrew University
Difficulty maintaining production
With US secondary sanctions to prevent Iran from obtaining improved oil recovery techniques, often produced in the United States or companies in other countries that fear Washington's opposition, Iran will have difficulty maintaining its oil production and meeting growing demand for natural gas and petrochemical products. In 2013 and 2014, at the height of the previous sanctions regime, Iran had to grapple with the same problem, and Iran was unwilling to sacrifice oil production and fear to reduce its domestic electricity production and had to reduce the amount of gas it sent to its petrochemical plants, A 7.5-million-ton decline in production and a loss of about $ 8 billion.
In the medium to long term, modern US sanctions may make things very difficult for Iran. As long as Washington can prevent it from acquiring vital technologies to recover oil, Iran's economy will become increasingly fragile.
In the medium term, the new US sanctions will make it difficult for Iran to continue oil production, meet domestic demand, finance government institutions, and in the long run could have devastating effects and make it virtually impossible for Iran to maintain its current oil production.