Last March, an Iranian oil tanker travelled for 17 days to deliver one million barrels of crude to Europe. It was the first time Iranian oil reached the European market since 2012, when an oil embargo was imposed on the Middle Eastern nation. The ban, which was meant to force Iran to end its nuclear program, was lifted in January.
In the current global market, seemingly insignificant shifts can have far-reaching consequences. As oil prices plummet and the U.S. attempts to make its recently reinstated oil exports competitive, the rise of Iran as an oil exporter to Europe does not appear very promising for America. Notwithstanding, I believe American oil companies are poised to thrive provided they put all the possibilities of the latest technology to work.
Aside from the battle for the European market, Iran appears as a strong U.S. competitor to satisfy Japan’s high oil demand. During the first months of the year, however, Iran was faced with another problem that hindered its export potential, namely, its inability to obtain oil tanker and shipment insurance from the American companies that dominate the scene.
But Iran has recently secured all the necessary certificates from insurers and it hopes to regain the market share it lost on account of the sanctions. And the tankers will not only be insured, but also upgraded. Iran’s tanker fleet, worth $2.7 billion, will undergo massive upgrades, on which the Iranian government plans to invest a staggering $2.5 billion.
As of today, oil exports from Iran have increased by 60% compared to last year. Before the sanctions, Iran had markets that have been now taken over by Russia, Saudi Arabia, and Iraq. And the end of the crude oil export ban in the U.S. has brought a new competitor into the global oil trade, one that caused no problems when Iran was at the top of its game.
Based on statistics from the International Energy Agency, before the embargo was imposed on Iran, it shipped about 400,000 barrels of oil a day to Europe. Tehran now plans to boost oil production back to pre-embargo levels: roughly 3.6 million barrels a day. Last February, Iran was able to hit the 3 million barrels a day mark for the first time since mid-2012.
Meanwhile, Iran and the U.S. continue to issue public statements claiming that the Iran deal has changed nothing in the relationship between the two countries. However White House analysts have signalled that bilateral communication has been much more fluid ever since the two nations reached an agreement over the development of nuclear weapons.
Ultimately, Iran wouldn’t be able to conduct much of its business with Europe, the Far East, and Africa without access to American financial institutions and insurance companies. It would seem that for as long as the U.S. does not consider Iran to be an imminent threat, the wells around Tehran will keep pumping and the tankers will be swiftly on their way.