But now, with the US’s withdrawal from Iran’s nuclear deal in May and re-imposition of sanctions against Iranian economy, the issue has come again under the spotlight as an approach to counter the new round of sanctions.
On July 1, Iran’s First Vice President Es’hagh Jahangiri announced that in a move to beat US sanctions, Iran will let private companies to export crude oil.
Speaking in a ceremony to celebrate the national day of industry and mine, the official said that Iranian crude will be offered on the bourse and the private sector can export it.
The latest news in this due came on Tuesday, when National Iranian Oil Company (NIOC)’s Managing Director Ali Kardor announced that offering crude oil at Iran Energy Exchange (IRENEX) will be commenced on October 28 to thwart US sanctions.
The government is to offer oil in the form of at least 35,000-barrel-cargos and the total of one million barrels per day at IRENEX, he announced addressing the 4th Iranian Petroleum and Energy Club Congress & Exhibition in Tehran.
Offering oil will be continued till November 4, the date when the second round of US sanctions will be imposed, and the new decision about continuing selling crude oil in the stock market for export and some other details in this regard would rely on the made assessments and the gained experiences in this period, Kardor said.
“Purchasers at IRENEX can pay 80 percent of the oil prices in foreign currencies and the rest in rial,” deputy minister added.
As the US sanctions on Iran’s oil sales targets the Iranian state-run sector, Iranian government decided to offer oil in the stock market to permit the private sector to export the product to foil US sanctions.
While offering crude oil at IRENEX is to be a temporary measure, there are ideas supporting it while there are some against it.
Those who are supporting the idea say that there are some reasons that offering crude oil in the stock market has not come true in the past; one is that it was planned to be offered in one step and private sector was not due to have any authority over it. The government decided to sell 500,000 barrels of heavy crude at a fixed price. The buyers wanted a lower price, but it was not offered; it is while the stock market’s activity is based on supply and demand.
These group say that the private sector’s basket is smaller and the private companies can sell the cargos of 50,000-100,000 barrels; therefore, they can successfully skirt the sanctions.
But those who are against the idea, say once we have not still resolved the problems and weaknesses in the stock trades, how can we set up a new proper ground for offering oil in this market?
Disapproving this attitude, Reza Padidar, the chairman of the Energy Committee of Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA), says: “Materializing the idea of offering oil in the stock market requires some expert work, but we as the private sector can design a model; so the government should go on with the plan.”
The opponents also believe that offering oil in the stock market cannot counter the sanctions, because this market works based on the free market which stands on supply and demand. We have no problem for supply, but we will definitely face difficulties in terms of demand.
And the main barrier seems to be the payment as it is due to be 80 percent in foreign currency while the sanctions make limitation for financial transactions.
While offering of oil at IRENEX is a pilot plan with its supporters and opponents, if conducted and continues it will definitely change Iran’ pattern of crude oil exports and create some big potentials for expansion of the deals and some new financial instruments over this highly-valued export product.
MNA/TT