Iranian Vice President Eshaq Jahangiri has pleaded with China and other friendly countries to buy more Iranian oil, the oil ministry news website Shana reported on Monday July 29th, as Chinese imports fell after US sanctions took effect.
Jahangiri pointed out that Iran is well aware of the hardships which friendly countries such as China are facing due to the US sanctions. “However,” he said, “we expect them to help us to overcome our current crisis.”
“We hope our friends will buy more oil and natural gas from Iran, despite the US restrictions. Iran can sell China natural gas via a transit pipeline from Pakistan,” said the vice president, as reported by Reuters.
Since last May Iran has been suffering the ban imposed on its exports and imports, especially after the sanction waiver ended. As a result of this sanction, almost 95% of Iran's crude oil has been taken off the global market. Iran's exports of crude in June fell from two million barrels per day (b/d) for the same period last year to less than 300,000 b/d this year.
Recent figures released by Chinese customs authorities revealed that China's imports of Iranian crude oil declined more in June this year, reaching less than 300,000 b/d, down 60% from June 2018.
Last year, before the US imposed sanctions on Iranian crude oil, China used to purchase from Iran around 690,000 b/d, while this year that average declined to 437,000 b/d. After the 2015 nuclear agreement, Iran boosted its oil exports, but now due to this drastic reduction in its crude shipments Iran is losing more than $25 billion per year. This is a major drawback for its oil-fuelled economy and government budget.
Accordingly, Iran has been pressuring Europe to ignore US sanctions and buy Iranian oil, but after Iran's recent capture of a British oil tanker, it has lost any chance of European help.
The Chinese general export-import figures reveal that its exports to Iran have significantly decreased. During the first half of this year, and due to US banking sanctions on Iran, China's exported goods to Iran were estimated at only $4.5 billion, which is 46% less when compared to those of last year.
Meanwhile, according to a Reuters report on June 28th, the US will sanction any country that buys crude oil from Iran. This US decision, which increases pressure on Iran, came as a result of an Iranian attack on a US drone last month. Brian Hook, US Special Representative for Iran, said to media "We will sanction any illegal purchase of Iranian crude oil," adding that the US will study reports of Iranian crude going to China.
Iran’s loss of China as an export market has been good for other countries in the same business: Russia increased its oil sales to China by 45% in June, and Saudi Arabia increased its exports to China by 84% in May.
These increased exports by Russia and Saudi Arabia of oil to China is not only because of the US-imposed sanctions but also because the US-China trade war has reduced China’s purchase of US oil.
As a result of these sanctions Iran's economy has shrunk. It was reported that in 2018, the Iranian economy shrank by 3.9% and the IMF expected a further 6% GDP slump in growth in 2019. The overall Iranian economy will decrease by more than 10% as Iran suffers more than two years of recession. Iran’s currency has dropped by 60% over the last year. Inflation has increased to 37% and the cost of food and medicine has risen on average between 40% and 60%.