Russia, Saudi Arabia Bluffing to Offset Iran Oil Void: Former NIOC Official

A former director of international affairs at the National Iranian Oil Company (NIOC) says: "When the United States put forward the issue of imposing sanctions on Iran's oil sales, it was said that Saudi Arabia and Russia could offset the void in the oil market by increasing their production, but the oil market stakeholders, right from the beginning, knew that these claims were a bluff.

** The US' imposition of sanctions on Iran’s oil exports and the threat of bringing it to zero may be grabbing many headlines these days in the world of Iranian and foreign media. Leading news agencies like Bloomberg, Reuters, along others often cover stories about the issue. Every day, different figures are released about Iran's oil output by these news outlets. The Iranian Ministry of Petroleum, however, is not about to announce any figures regarding Iran’s crude oil production or exports as it might be taken advantage of by the US.

Seyyed Mohsen Ghamsari, in a conversation with Shana, speaks of American policy of zeroing Iran oil exports: "America's hostility towards Iran is deeply rooted. Before the 1979 Revolution, nearly 65,000 Americans ran all the affairs in Iran and after the revolution they felt that they had lost their stable island in the region; so their opposition and hostility towards Iran is rudimentary."

Many analysts consider the new US sanctions on Iran to be stricter than the previous ones. What do you think?

I do not think so. The sanctions are more commercial and trade-restricting than the previous embargoes in 2011, and the reason is that the president is a trader and a businessman; the sanctions in 2011 and before were mostly political, and Iran, in addition to the United States, was sanctioned by the UN Security Council and the European Union. If you remember, the Americans, after pulling out of the Joint Comprehensive Plan of Action (JCPOA) said they would bring Iran's oil exports to zero, but now and with the start of sanctions, the exports have not been zero and will not either.

What is the reason for America's failure to fully impose sanctions on Iran’s oil exports?

For several reasons, the United States failed to fully succeed in boycotting Iran's oil exports. First, the sanctions that are now imposed against Iran are more economic than political; and the imposer of the sanctions is primarily interested in economic benefits than political ones. Now, if these benefits are provided, this country will no longer insist on continuing the embargoes. Second, regarding the issue of surplus supply in the oil market, with the exception of the crude oil supplied by Iran which is medium and heavy, the remaining types of crude are in surplus supply in the market; so there is not much replacement for Iranian oil for which there is a shortage in the market. When the United States spoke of a boycott on Iran's oil sales, it was said that Saudi Arabia and Russia could offset the void in the market by pumping more oil, but oil market stakeholders knew from the beginning that such claims were a mere bluff.

Why a bluff?

It's about the oil produced by these countries and its difference from the Iranian oil. Saudi Arabia currently supplies 10 million barrels of oil per day, most of which is in light grades, while the medium oil output of this country is about 1,800,000 barrels per day; so it cannot offset a drop in Iran's oil exports. What Saudi Arabia says about increasing production concerns light oil production. In the case of Russia, Russian Urals oil also cannot precisely replace Iran's oil, because it is lighter than Iran's crude oil. Russia and Saudi Arabia may be able to increase their medium crude oil output for one or two months and replace Iran in the market, but certainly they will not be able to produce the item continuously. For this reason, I say that these sanctions are fragile.

What is your reason for stressing that the sanctions are fragile this time?

In the previous sanctions setting, everything was completely clear about how much any country would buy oil from Iran, and it was said that the buyers would reduce their imporst by 20 percent every 6 monhs. But this time, no exact numbers have been released so far. I shall remind you that in the previous round of sanctions, efforts were made to push consumers to use synthetic crude oil. This way they blended Venezuela's crude oil with Saudi Arabia's crude oil to produce something called "Medium Crude Oil" to replace Iran's oil. This time, however, it is not possible to produce such crude because of the problems with Venezuela and the impossibility of continued supply of oil by that country. If you put all these things together, you will see that these sanctions are fragile.

Now given what you have mentioned, how much oil will the National Iranian Oil Company (NIOC) be able to export despite the sanctions?

I think even if these sanctions are serious and become operational, Iran's oil exports will continue to rise further than before. We exported around 800,000 barrels of oil per day at the height of sanctions imposed by the United Nations Security Council and the European Union against Iran. I think that during the current period, in the most pessimistic case, we will probably export between 1.3 to 1.5 mbd.

Mr. Qamsari, does continually imposing sanctions on Iran force customers to change the technical specifications of their refineries and use hybrid or light petroleum to replace Iranian crude oil?

There are several discussions in this regard. Firstly, it's not easy to make changes in refineries. Secondly, any technical change to refineries requires huge investment, which is currently not available to refiners. Thirdly, Iran is a sustainable crude supplier and the customers are not willing to overlook this advantage in working with Iran; and fourthly, the geopolitical position of Iran and its proximity to the oil delivery routes that refiners can supply their oil from Iran at any time. For example, purchasing oil by Indian refiners from Iran is naturally more cost effective because of the distance. Therefore, changing the technical specifications of refineries is not operational in order not to buy oil from Iran.

But allow me to add a point regarding sustainable supply of oil. I do not want to make too much of NIOC, but, according to all the refiners, the company has a good record in the world in terms of reliable oil supply. All the refiners who are in contract with the National Iranian Oil Company know that even in the most difficult circumstances, the company did not cut its oil supply and always supported them; which is why after the Joint Comprehensive Plan of Action (JCPOA) was struck, despite the fact that many suspected, we were able to quickly regain our market share.

Do Mr. Trump's advisers, without studying and knowing what you just mentioned, claim they could bring Iran's oil exports to zero?

Certainly, all of these matters must have been conveyed to Mr. Trump, but the president of this country would not easily listen to what experts say. Of course, we must remember that the world is a world of independence. It is not correct to believe that all the refiners in the world would comply with US intentions. They also consider their own interests, but we must accept the fact that the United States is a huge market used by all countries, and the US is putting pressure on countries by using this very market as a tool. I remember that during the previous sanctions period, Obama's Secretary of State, Mrs. Clinton, managed to align a large number of industrialists and refiners on a visit to Asia, especially India, and threatened to stop providing certain stuff like catalysts to the Indian refiners. In fact, economic pressure helps the United States reach its goals, so it is very important in this situation that we (Iran) withstood these pressures. I shall emphasize once again that there are no substitutes for Iranian oil. If there were, they would have easily used it.

Is this to say that you believe that the United States will have to renew the 180-day waivers it has given some Iranian oil customers?

Exactly. Of course, you should note that in the second half of the year, demand for oil will decrease, and if sanctions persist, Iran's oil exports will decrease, too, which is not linked to the sanctions. But, as I said, I do not think Iran's oil exports will drop anywhere below 1.5 mbd.

Is it possible that, like the 2011 boycotts, the US demands a further reduction in Iranian oil imports by its customers at the end of the 180-day waivers?

I see it unlikely, but if that happens, then we have to seek proper solutions. Of course, this should not be forgotten that US hostility towards Iran is deeply rooted. Before the victory of the Islamic Revolution back in 1979, nearly 65,000 Americans ran all of Iran's affairs, and after the revolution they felt that they had lost their stability island in the region, so their opposition to Iran is rudimentary. On the other hand, we would are not unduly optimistic about the outcome of sanctions, so we ought to exert every effort to reduce out imports and organize the economy.

Media outlets such as Reuters claim that Russia is selling Iranian oil on the market given the sanctions. Although Mr. Zangeneh has denied this outright, rumors of this kind are being heard with the onset of unilateral US sanctions against Iran. Has there ever been a case where a foreign country has handled Iran’s oil sales?

Absolutely not. The main reason is that Russia does not have the ability to import crude oil, or if it had, it would have to travel long distances (through the Black Sea or the Baltic Sea) to import Iranian oil, which imposes high costs on Russian refiners. Meanwhile, the Russians are themselves exporters and sellers of oil, so it is not reasonable for them to sell Iranian oil.

I believe that some political directors mistakenly think that Russia would help Iran under the sanctions. If you remember, Iran signed an agreement with Russia to swap 500,000 barrels of oil, which eventually ended up with 100,000 barrels.

Given the fact that oil producers, by increasing their output and offering special discounts, seek to capture Iran's share of the market, does Iran use the same tool to maintain its market share or provide free oil to some of its customers?

The National Iranian Oil Company does not give any country free oil. Regarding discounts to oil buyers, we also give them discounts, but not so much as some people believe and keep saying. The discount we give our customers is somewhat competitive with the rest of the crude oil suppliers. If we are to sell our oil very expensive, it's natural that oil buyers would not buy from us anymore. India's Reliance Refinery, with a capacity to process 1.2 mbd of crude oil, consumes 42 types of crude oil, and if we are to overcharge our oil, they will no longer buy from us. On the other hand, we do not sell the oil too cheaply. However, some countries like Iraq, are ramping up their production; the country, by offering very handsome discounts to its customers, is increasing its market share.

Why do people ask NIOC for oil money while the company is only responsible for selling crude oil?

This is a kind of deception. It is the duty of the National Iranian Oil Company to produce and export oil, and repatriate the proceeds from selling the item to the Central Bank. Unfortunately, the public opinion is otherwise, and we must try to change that.

Interview by Roya Khaleghi

Source: SHANA