China Imports More Iranian Oil Now Than It Did Before Sanctions

Reiterating that the US and Western countries cannot be trusted, Supreme Leader Ali Khamenei said Ukraine has fallen victim to US policies and the crises created by Washington without mentioning Russia's invasion in his speech.

He added that Iran opposes the killing of people and the destruction of the infrastructures belonging to other nations and added that Iran wants the war in Ukraine to end. "But resolving any crisis is only possible if its root causes are identified. The Ukrainian crisis is rooted in American policies, Western policies".

“The US disrupted the stability of the country by interfering in its affairs and organizing rallies and creating a colored coup,” he said, possible referring to the revolution in 2014 that toppled Ukraine’s former president Viktor Yanukovych. In a televised speech Khamenei claimed that people in Ukraine "did not enter the scene [to defend their country] because they did not recognize [the legitimacy of] their government."

Khamenei’s distortion of the facts on the ground were obvious. The world has been in awe as Ukrainians of all walks of life have joined volunteer forces to fight against Russia’s invading forces.

After widespread protests following the disputed re-election in 2009 of ultra-conservative Mahmoud Ahmadinejad, Khamenei blamed Western powers, particularly Britain, for instigating "sedition" in Iran. The protests became known as the ‘Green Movement’.

"What they did in 2009 was a new initiative which was Americans' initiative…It was a color revolution, actually a color coup, an unsuccessful color coup," he said in a speech on January 9, 2016. "The coup was an attempt to incite a full-scale civil war in Iran [to pave the way] for foreign domination."

Calling the governments of President Volodymyr Zelenskyy and former Afghan president Ashraf Ghani "puppet regimes", he said they had both confessed that the US had abandoned them when crises arose at home.

Zelenskyy’s Twitter account has jumped to nearly four million followers in recent days and his determination to resist the invasion has changed long-held European policies of low defense spending and transfer of weapons.

In the speech that marked Eid al-Mab’ath – the anniversary of the Prophet Mohammad's announcement of his prophethood, Khamenei drew a parallel between the early Islamic history and current times and said the US is a perfect example and manifestation of modern "ignorance", as were the opponents of the Prophet in his time.

In the past few days, Iranian officials including President Ebrahim Raisi and Foreign Minister Hossein Amir-Abdollahian, also attributed the crisis in Ukraine to NATO and American “provocations".

Raisi also held a phone call with the Russian President Vladimir Putin on the first day of the Russian invasion. "The President of Iran expressed understanding with respect to Russia’s security concerns caused by the destabilizing actions of the United States and NATO," a Kremlin press release said Thursday evening.

Many Iranians and media outlets have a different view. "Contrary to the government's stance, the hearts of many Iranians are with the people of Ukraine and they condemn this aggression,” reformist commentator Sadegh Zibakalam tweeted February 26.

Some Iranian journalists and media have criticized Raisi's call. "What is the justification for Raisi's call to Putin on the first night of Russia's invasion of Ukraine and subtly supporting Russia?" Behrouz Azizi, an Iranian journalist who identifies himself a "moderate conservative", tweeted Thursday.

United States and European sanctions on Russia are far milder than against Iran, with oil and gas flowing to the West. While Russian gas exports to Europe via Ukraine continued normally Monday, financial sanctions on Russia and moving the Champions League soccer final have prompted some Iranian commentators to point out that Iran cannot move into the breach if Europe were to bar Russian gas.

Shargh newspaper wrote Monday that it would be wrong to overplay Iran's potential for replacing Russia in European markets. The reformist newspaper informed readers that Iran could not supply LNG (liquefied natural gas) given a lack of infrastructure – although Russian gas is supplied mainly by pipeline.

Iran needs foreign investment and technology to develop gas infrastructure, which has been difficult given years of international and United States sanctions. Iran and Russia hold 37 and 32 trillion cubic metres (tcm) of the world's proven gas reserves, while they respectively produce 250 and 638 billion cubic meters (bcm) of gas annually while respectively consuming 233 and 411 bcm domestically.

One of Tehran’s main aims is talks with world powers over restoring the 2015 nuclear deal - which US President Donald Trump withdrew from in 2018 – is to see lifted draconian US sanctions. Total, the French energy major withdrew from a contract in the South Pars gasfield in 2018due to the US ‘maximum pressure’ sanctions, a contract that included LNG development, which could be important for Tehran’s worldwide exports.

"The truth is we can't do anything in this regard unless we solve our problems with the rest of the world, which requires the restoration of the nuclear deal (JCPOA) and deepening of relations with developed countries," Morteza Behrouzi, energy expert, also told Hamshahri newspaper in September 28.

The Chalous Basin reportedly holds 30 percent of developable natural gas reserves of all Caspian Sea littoral countries and could, following $19 billion in investment and the lifting of US sanctions, be well placed to supply Europe.

Even before the recent Ukraine crisis, some argued Russia has over the years tried to prevent Iran from exporting gas to Europe.

"Russia will not allow Iran to enter the European gas markets that easily and will use every tool at their disposal to prevent Europe from overcoming its dependence on Russian gas," Alireza Soltani, political economist told Entekhab website February 16. "They will prevent [Iran from exporting gas to Europe] but even if it’s to happen, they want it to happen under Russian control."

Iranian officials have long been warning of inadequate natural gas production that cannot keep pace with domestic consumption. Energy consumption is relatively high because of state subsidies to consumers − costing $45 billion a year- that put gasoline, electricity and other fuels at low levels compared to other countries. Iran's oil minister Javad Owji said November that to avoid becoming a net importer, Iran needed $160 billion of investments in its oil and gas industries in the coming years.

Over the weekend, Western countries moved to expand economic sanctions against Russia that threw tens of thousands of troops with tanks and air power to conquer Ukraine. President Vladimir Putin’s decision was the most serious challenge to Western security perhaps since World War II.

Finally, Western countries agreed to remove several Russian banks from the international banking system SWIFT, an action that was also taken against Iran in the past decade.

While, unlike the Iran case, Russian oil and gas have not been sanctioned, experts agree that banking and other sanctions will impact its energy exports and revenues Moscow depends on.

Western sanctions threaten to substantially weaken the Russian ruble, as well as the health of its banks. They could also trigger high double-digit inflation, a sharp recession and serious unemployment, with their inevitable political consequences. These in combination could turn into a systemic affliction that would be hard for Russia to shake off even after the crisis end in some sort of positive resolution.

Iran’s example is there to see. Although international sanctions were lifted in early 2016 after a nuclear deal was signed and Iran was able to take a deep breath, its international trade and banking were far from normal.

100%

Iranians complained for two years that foreign companies were reluctant to deal with them, banks would not easily cooperate to facilitate trade deals and even ordinary Iranian expats encountered problems in other countries to extend visas, open bank accounts and receive credit lines.

Residual sanctions syndrome

This is what we can call ‘residual sanctions syndrome’. One of the most important aftereffects of international sanctions is loss of credit worthiness in the world financial system, even after sanctions are formally lifted. Institutions are extremely cautious to lend money and most importantly foreign investors avoid a country that experienced Western sanctions.

Again, Iran is a good example. The two-year period from 2016-2018 when most economic sanctions were removed, Iran had a hard time to get major deals and joint ventures. While the country needed tens of billions of dollars in investment, it was able to secure just a few billion dollars.

When Donald Trump became president and criticized the nuclear agreement in 2017, the few investors, such as the French energy giant Total, which had carefully tip-toed into Iran after sanctions had been removed, immediately slowed down investment and eventually withdrew when the US began reimposing sanctions.

Economic sanctions in today’s global economy are also complicated matters and even after they are removed many financial and business actors are not sure what provisions and regulations have been relaxed and how to make decisions without risking legal complications.

One aspect of the residual sanctions syndrome is the persistence of the underlying political factor(s) that led to a sanctions’ regime in the first place. Iran did come to an agreement with the United States and its allies over limiting its nuclear program, but it was still perceived as a pariah state because of its anti-Western foreign policy and its continued overt and covert destabilizing actions in the Middle East.

The psychological aftereffects of sanctions tend to be strong if the sanctioned party is expected to re-exhibit erratic behavior. Would-be investors and trade partners know that there is an inherent risk of doing business with an actor that was once pressured by sanctions and is likely to repeat undesirable actions either driven by aggressive impulses, ideology or militarism.

Even if Putin resolves the Ukraine issue with an agreement and the immediate causes of sanctions are resolved, Russia will lose trustworthiness with business decision makers who simply cannot be sure when the next crisis will come.

Bloomberg quoted Rystad Energy Chief Executive Jarand Rystad as saying that the conflict could jeopardize one million barrels of crude that flows through Ukraine and the Black Sea, but “long-term disruptions could be far more significant.”

Adi Imsirovic, a Senior Research Fellow at the Oxford Institute for Energy Studies and former oil trader, said in a report published by Reuters that he is surprised the price has not jumped to $130 per barrel already. One reason could be that simmering tensions for the past months already contributed up to $10 a barrel to recent price increases.

But on Friday prices that had spiked above $100 a barrel retreated, signaling some reassurance that the West does not intent to sanction Russian energy supplies. Half of Russia’s crude oil exports, 2.3 million barrels a day go to the West.

Russia supplies ten percent of the world’s oil and is the second largest natural gas producer after the United States. Europe depends on Russia for close to 40 percent of its natural gas consumption.

President Joe Biden signaled on Thursday that he may release more supplies from strategic reserves in coordination with other countries, to address any shortfalls.

Analysts also raise the possibility of a nuclear agreement between Iran and the United States that could end Washington’s oil export sanctions on Tehran and help control prices. But Iran has little extra capacity, which is already not being utilized and exported. However, Imsirovic noted that Tehran has stockpiled 80 million barrels on tankers at sea that could be an immediate partial help.

An agreement between the US and Iran, however, remains uncertain as signals indicate Tehran insists on its tough conditions and US says “serious issues” remain unresolved. Statements by Iranian officials have not signaled of a softening of their position. Tehran still demands more US sanctions to be lifted and on Friday its nuclear chief said the country will continue to enrich uranium at 20 percent, even if sanctions are lifted.

It is not clear if Washington will make more concessions at this point, although the need to increase oil supplies looms large when the United States is confronting rising inflation.

Saudi Arabia and other Middle East producers could try to increase output too. Analysts are not sure whether low production by the Saudis is intentional or the result of technical limitations. The kingdom reduced output in 2020 when demand slumped with the pandemic. Some say that it is not easy to revive reduced production. But if Riyadh is holding back production that could also be related to Iran.

Saudi Arabia is not thrilled by the Biden Administration’s attempts to reach a nuclear deal with Iran, which many see as a weak arrangement that would not prevent Tehran from getting close to producing nuclear weapons. Many regional countries see the specter of a nuclear Iran as a serious threat to their security.

There is also the issue of Tehran’s support for Yemen’s Houthi rebels that fight a Saudi-led coalition that intervened in the country to support the internationally recognized government.

The gathering is scheduled to start at 19:00 (local time) in front of the embassy building where people plan to hold a candlelight vigil for the lives lost during the Russian invasion.

It is still not clear if Iran’s government, an ally of Russia, will permit the gathering.

Many social media users have said that the rally should be instead held in front of the Russian embassy, but the likelihood of authorities not allowing a gathering there is much higher.

Russia’s attacks on the capital Kyiv and several other cities have been met with fierce resistance, with President Volodymyr Zelensky saying that “The occupiers wanted to block the center of our state... We broke their plan.”

Iran officially blames US and NATO's “provocations” for the crisis, reiterating support for the Russian invasion.

Iran's state television, operating under the control of Supreme Leader Ali Khamenei, has been supporting Russia's invasion of Ukraine during the past three days.

As President Ebrahim Raisi rushed to express support for Russia on the first day of the invasion, observers on social media said the sheer fact that he called Vladimir Putin in this situation, put the Islamic Republic in an embarrassing situation.