Iran, unable to sell oil, stores it on tankers (WASHINGTON POST) By Joby Warrick and Steven Mufson 05/14/12)
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Increasingly hard-pressed to find buyers for its petroleum, Iran has
been routinely switching off satellite tracking systems on its sea-
bound oil tankers for more than a month, in what U.S. officials and
industry analysts describe as a cat-and-mouse game with Western
governments seeking to enforce sanctions on Iranian exports.
The unusual tactic was begun in early April and affects a quarter of
Iran’s tanker fleet, according to the International Energy Agency
(IEA), which has been monitoring the practice. The move, a violation
of maritime law, is only modestly effective in cloaking 1,000-foot-
long tankers as they ply the oceans in search of open ports and
willing buyers. But it underscores Iran’s precarious position as it
faces ever-tighter Western restrictions against its oil industry,
which provides the bulk of export and government revenue.
Hobbled by sanctions against its banks and a growing international
boycott of its petroleum, Iran is seeing its revenue sag while its
oil sits in storage depots and floats in tankers with nowhere to go,
U.S. security officials and diplomats say.
The country’s worsening prospects have encouraged Western governments
as they prepare for nuclear talks with Iran, set to begin May 23.
U.S. officials say the building economic pressure increases the
chances for a breakthrough in which Iran would agree to abandon
elements of its nuclear program.
“They are increasingly isolated — diplomatically, financially and
economically,” David Cohen, the Treasury Department’s undersecretary
for terrorism and financial intelligence, said Thursday. “I don’t
think there is any question that the impact of this pressure played a
role in Iran’s decision to come to the table.”
Cohen noted the cascading effects from Iran’s oil crisis spreading to
other parts of the economy as consumer prices and unemployment rates
“The value of their currency, the rial, has dropped like a rock,”
Cohen told a gathering at the Center for Strategic and International
Studies in Washington. “That has had a significant impact on Iran’s
ability to pay for materials for the nuclear program, and, more
broadly, it puts pressure on the leadership.”
Whether Iran is prepared to make significant concessions is unclear.
But there is little doubt about the toll being exacted by sanctions.
“It has definitely hurt Iran,” said Amrita Sen, a London-based
commodities analyst with Barclays Capital. “No doubt about that.”
One key impact of recent sanctions has been to choke off shippers’
access to maritime insurance, nearly all of which is underwritten in
Europe, Sen said. That has made Iran ever more dependent on its own
fleet of 39 tankers, including 25 super-tankers, according to IEA
Those ships also face mounting obstacles. After coming under pressure
from the United States, the ship classification society Lloyd’s
Register said in late April that it would close its office in Iran
and stop certifying the safety of Iran’s ships. The certification is
needed by ships seeking entry at most of the world’s ports. Late last
year, another leading classification society, Norway’s Det Norske
Veritas, ended its relationship with Iran under U.S. pressure.
An IEA report issued Friday said Iranian crude output was still
relatively high, at 3.3 million barrels a day in April, down slightly
from last year. But the agency said much of Iran’s unsold production
is ending up in onshore and floating storage.
Estimates of Iranian crude added to floating storage in March and
April have ranged from 450,000 to 800,000 barrels a day, the IEA
said. An additional 20 million to 25 million barrels have been added
to onshore storage facilities in recent months.
Big customers cut back
While countries such as Turkey and South Africa appear to have ramped
up imports from Iran ahead of the July 1 sanctions deadline, some of
Iran’s biggest customers, including Japan and South Korea, have been
gradually reducing Iranian crude imports. Europe has cut its imports
from Iran to less than half its earlier level of 700,000 barrels a
In addition, India has trimmed its oil purchases from Iran, which
last year covered 10 percent of India’s oil consumption. During her
visit there last week, Secretary of State Hillary Rodham Clinton
pressed India to further reduce its oil imports from Iran.
Members of the Organization of the Petroleum Exporting Countries are
filling in the gap. Motivated in part by high world oil prices, OPEC
crude supply in April rose 410,000 barrels a day, with Iraq, Nigeria
and Libya providing about 85 percent of the increase, according to
Saudi Arabia’s crude oil production in April was unchanged at the
relatively high level of 10 million barrels a day, but the IEA report
said the kingdom has been offering price discounts for its Arab Light
crude, which is widely sold to Asia. That could encourage countries
such as China to shun Iranian oil.
“They can’t move the stuff, and they’re really hurting,” said a
senior State Department official with access to intelligence on
Iran’s oil shipments. He spoke on the condition of anonymity because
he was not authorized to speak publicly about the matter.
Analysts warned, however, that Iran might have an easier time selling
its oil during the third quarter of the year, when global oil
consumption usually peaks. At this time of year, many refineries take
advantage of relatively slow oil use to close for maintenance.
The GPS tracking systems on Iran’s sea-going tankers are required
under international law as a safeguard against accidents and spills,
and ship captains are allowed to shut them down in only a handful of
circumstances, such as when navigating waters known to be frequented
Vessels are easily tracked
U.S. officials dismissed the Iranian tactic as ineffective, noting
that Western spy satellites and other surveillance systems are easily
able to track large ships on the open seas, even with the GPS turned
off. The practice, begun in early April and noted at the time by a
Reuters news agency report, has continued, reflecting a determined,
if ultimately ineffective, effort to circumvent sanctions, the
Some — and perhaps all — of the marooned oil will eventually be sold,
U.S. officials acknowledge, as oil traders seek to make a quick
profit on deeply discounted Iranian crude. But with global prices
edging down in recent weeks, Iran may have to settle for far less
than the world market price, the State Department official said.
Iranian officials are expected to press for relief from sanctions at
this month’s nuclear talks. The United States and its allies will
insist on commitments from Iran to rein in its nuclear program and
come clean about what Western governments say were past secret
research efforts by Iranian scientists to design nuclear warheads.
The Associated Press on Sunday published a computer-generated drawing
of what it said was an Iranian explosives containment chamber of the
type needed for nuclear-arms-related tests. The U.N. nuclear
watchdog, the International Atomic Energy Agency, has long alleged
that Iran used such a chamber to test detonators for potential use in
a nuclear weapon. Iran has denied ever seeking to acquire atomic
The wire service said the image was based on information supplied by
an individual who had seen the chamber at Iran’s Parchin military
site. The AP did not provide additional details, saying that doing so
could endanger the informant’s life. (© 2010 The Washington Post
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