More Evidence Emerges Of Russia Taking Iran's Oil Market Share

Seven traders contacted by the agency said they had continued using Binance after the company in November 2018 told traders in Iran to close their accounts, while 11 others who failed to respond to Reuters confirmed on their LinkedIn profiles they had also continued trading crypto-currencies through Binance.

Iran has a complex relationship with crypto-currencies, which have both helped hide various kinds of trade from United States’ eyes and opened up opportunities for illegality. In May the Intelligence Ministry announced it had blocked over 9,200 accounts, belonging to 454 people, used for illegal or undeclared transactions of currency and digital currency, with the relevant trades amounting to 600,000 billion rials, around $2 billion.

However, many reports in Iranian media have indicated that large scale crypto mining has been taking place by influencial or well-connected networks and some Chinese companies have also been present in Iran using cheap, subsidized electricity.

A 2021 study found that 4.5 percent of global Bitcoin mining – worth then around $1 billion – was in Iran, leading to pressure on electricity supply in peak times and to repeated government assurances that the sector would be better regulated.

‘Proactive approach’

Binance, which leads the world’s $950 billion crypto industry, is owned by a holding company based in the Cayman Islands and therefore not liable to primary US sanctions. But ‘maximum pressure’ gave the US government powers to sanction third parties dealing with Iran’s banking sector, including the option of shutting them out of US markets.

Monday’s Reuters report suggested that the withdrawal of Iran-based traders from Binance came after September 2021, a month after the exchange tightened checks, including bringing in a requirement that customers verify identities rather than just register with an email address.

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In January, Reuters reported interviews with former Binance senior employees, internal mail and mail with national regulators, revealing earlier concerns over lax compliance. This was despite earlier claims, including by the chief financial officer that the exchange had a “proactive approach to detecting and squashing money laundering,” and long after Binance announced in August 2019 Binance that it included Iran – along with Crimea, Cuba, Syria, and North Korea – among “hard five sanctioned” jurisdictions.

Evading US monitoring was attractive in Tehran. “Cryptocurrency is a good way to circumvent sanctions and make good money,” Reuters was told by a trader named as ‘Ali,’ who said he had used Binance for around a year.

Tightening US pressure?

The continued presence of Iranians in the exchange was well known in the company, and regularly joked about by insiders. By September 2019, Tehran was among the top cities for followers of Binance's Instagram page, ahead of New York and Istanbul.

Now with 120 million users offered access to a variety of digital currencies and derivatives, Binance was founded in 2017 by ‘CZ’ – its chief executive officer Changpeng Zhao – and last month hired soccer star Cristiano Ronald to help with promotion.

The reported withdrawal of Iranian traders from Binance since last year, perhaps with the company under US pressure, came as negotiations have continued between Iran and world powers over restoring the 2015 Iran nuclear deal and easing the US sanctions introduced when Washington quit the agreement in 2018.

The apparent tightening has occurred under the administration of President Joe Biden, which wants to restore the 2105 deal, rather than under previous President Donald Trump. Monday’s Reuters report highlighted US government expectations that companies should use tools to prevent traders concealing their locations through VPNs (virtual private networks) – which are common in Iran both to evade domestic screening and disguise international transactions.

An analysis published by Reuters on Friday quotes Indian officials who said, “New Delhi wants to avoid repeating what it sees as the mistakes of the past: abiding by sanctions on Iran and winding down oil imports, only to see its main regional rival China continue unpunished and benefit economically.”

The result has been a huge leap in volumes from Russia. In May, India imported 819,000 barrels per day (bpd), from 277,000 bpd in April and 33,000 bpd a year ago. Russia is now the second biggest supplier to India, replacing Saudi Arabia, while Iraq continues to be the largest.

India abided by US sanctions when former US president Donald Trump withdrew from the 2015 nuclear agreement known as JCPOA and gradually imposed full oil export sanctions on Iran. But China continued buying small volumes until November 2020 when it began noticeably increasing imports of illicit Iranian shipments.

China has kept up larger Iranian oil imports and is now buying massive amounts of Russian oil at discount prices. According to various estimates Tehran is exporting around 750,000 barrels per day and China is by far the largest buyer.

The Biden Administration, which decided early on to start talks with Tehran to revive the JCPOA, has failed to put effective pressure on China to stop imports of Iranian crude, which also come with a discount.

This has convinced India not to join Western sanctions against Russia, seeing itself shortchanged by abiding with US sanctions on Iran, while its rival is getting cheap oil.

"India has the attitude that if China is buying, why wouldn't we?" Robin Mills, chief executive of energy consultancy Qamar Energy told Reuters.

"India doesn't want to be in the same position again when China continued to buy Iranian oil and India stopped it."

Last month, Indian Foreign Minister Subrahmanyam Jaishankar posed the question at a conference: "Why are Indian money and funds coming from India seen as funding the war (in Ukraine), when Europe also buys gas from Russia?"

Referring to US sanctions on Iranian and Venezuelan crude, he said: "They (Europe and the US) have squeezed every other source of oil we have and then say you will not go to the market and get the best deal for the people; it's not a fair approach".

That all means New Delhi is reluctant to put US interests ahead of those of Russia, especially after it felt it was harmed economically by sanctions on oil from Iran and Venezuela.

Under Modi's nationalist government, India has pursued an assertive foreign policy, standing up to China in a two-year military border standoff and rejecting Western criticism of domestic policies some say are authoritarian and divisive.

Indian officials counter that what refiners are doing is legal and some European countries are still buying Russian oil and gas. Executives at state-owned and private refineries do not expect purchases of Russian crude to slow any time soon, the report said.

The United States has offered to sell more defense equipment and oil to India, for example, and New Delhi joined a U.S.-led trade partnership Indo-Pacific Economic Framework for Prosperity.

India is a member of the Quad alliance, which links it with the United States, Japan and Australia. India also signed a free trade agreement with Australia, talks for which initially began in 2011.

With reporting by Reuters

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) said on Wednesday that the international network used a web of Persian Gulf-based front companies to facilitate the delivery and sale of hundreds of millions of dollars’ worth of Iranian goods from Iranian companies to East Asia.

Two UAE-based Iranian nationals, Morteza Rajabieslami and Mahdieh Sanchuli, two vessels (BS BRAVO and SUMMER 5) as well as 13 companies including Iran's Persian Gulf Star Oil Company, Jam Petrochemical Company, and several firms in UAE and Hong Kong have been added to OFAC's Specially Designated Nationals list.

“While the United States is committed to achieving an agreement with Iran that seeks a mutual return to compliance with the Joint Comprehensive Plan of Action, we will continue to use all our authorities to enforce sanctions on the sale of Iranian petroleum and petrochemicals,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson.

Secretary of State Antony Blinken also announced the new sanctions on the Iranian petroleum and petrochemical producers, transporters, and front companies in a tweet, saying that “Absent a commitment from Iran to return to the JCPOA, an outcome we continue to pursue, we will keep using our authorities to target Iran's exports of energy products.”

Some of the new sanctions were levied pursuant to Executive Order 13846, which would be lifted in case the US returns to the JCPOA, whose prospects are withering. 

The man, named only as ‘Alexander J’ due to German privacy laws, allegedly between 2018 and 2020 sold Iran laboratory equipment, including four spectrometers, that required special licenses and was worth nearly 1 million Euros.

The Hamburg report said two alleged accomplices were still sought, and listed the case under ‘proliferation,’ which it defined as “the procurement of products for the production of nuclear, biological and chemical weapons of mass destruction and the corresponding carrier technology (rocket technology), including the know-how required for this."

Iran's regime is mentioned 82 times in the 194-page Hamburg report that focuses on a wide range of security threats to Hamburg's democracy.

At the time of Alexander J’s arrest in September, German police searched offices and apartments in 11 separate locations, across three German states – Hamburg, Schleswig-Holstein and North Rhine-Westphalia.

A report last year from the Washington-based Institute for Science and International Security (Isis) said the case reflected “the continued effort of Iran to break trade control laws and sanctions of other nations to procure items for its nuclear and ballistic missile programs.” Isis said Iran had in the Alexander J case not sought permits required under the terms of the 2015 Iran nuclear deal for equipment that “could contribute to sensitive activities, including enrichment-related activities, reprocessing or heavy-water-related activities.”

A day after Fars claimed that Iran’s oil exports in 2022 will reach $36 billion, it published an article quoting senior officials that contrary to other reports, Iran relies very little on barter in exchange for its oil.

There have always been suspicions and some evidence that Iran did not receive much cash payments for its crude exports banned by United States’ sanctions, and it received goods, especially from China, its biggest customer. There was evidence during international sanctions from 2011-2016 that Iran imported sometimes useless merchandise instead of getting paid in cash for the illicit oil exports.

Fars quoted oil minister Javad Owji speaking in a television program, who said that “All oil incomes are received at the due date. We receive 80 percent in cash and we import medicines and essential goods with the remainder.”

Owji underlined that the 20 percent of barter was not imposed on Iran, but were cargos ordered based on need and expected quality of goods.

Mohsen Khojasteh-Mehr, general manager of the National Oil Company of Iran confirmed the same information to Fars, but slightly in more vague terms. “Oil export income returns to the country, which means receivables are received,” he said.

Suspicions that Iran might not have been receiving cash for oil exports are reinforced by the financial hardship the government faces. Many government-sector workers have not been paid for months while the national currency has lost 25 percent of its value since March.

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Facing a large budget deficit estimated to be at least a 50—percent shortfall, the government stopped food import subsidies in early May. Some officials have said the subsidy was costing $15 billion a year and was expected to reach $20 billion with rising global inflation.

The move pushed food and other prices higher in May and June bringing the overall official annual inflation rate to 55 percent while food prices rose by 80 percent compared with May 2021. This led to many protests around the country.

Fars said that oil revenues are collected in various ways as third-party US sanctions restrict Iran’s banking international banking options.

Creating new and undisclosed bank accounts, networking through the informal hawala system or money exchangers, using the potential of smaller banks, barter and receiving payment in the national currencies of oil importers were the main methods used, Fars said.

After former US President Donald Trump withdrew from the 2015 nuclear deal, or JCPOA, in May 2018 and imposition of sanctions, Iran’s oil exports declined to almost 10 percent of what they were before. The government relied on the National Development Fund, or its foreign currency reserves, to finance essential needs.

Amid its economic crisis, Iran has so far refused to make a deal with the United States to revive the JCPOA and lift the sanctions. This has led to demands by politicians and people for agreeing to the US terms and the hardliner government backed by the IRGC is engaged in a daily campaign to convince the public that overall situation is good and there is little need for a nuclear deal.

Oil exports began to recover in November 2020 as Joe Biden won the US election and signaled his intention to open talks with Iran to revive the JCPOA. Iran’s oil shipments kept rising in 2021 from around 250,000 barrels per day to more than 750,000, raising its income and claims that it had defeated US sanctions.