I randomly picked up a book called Heavy Metal Islam a few months ago by Mark LeVine, which (as the subtitle succinctly explained) is about rock, resistance, and the struggle for the soul of Islam. With my EnergyRadar™ always switched on, I was immediately drawn to the chapter about Iran (fortuitously, you can read it here).
It turns out the current regime in Iran censors everything, from lyrics to instruments. LeVine outlines the extent of this, from women not being allowed to sing solos in public, to government departments needing to approve musical compositions (no wonder Iran was so miffed when a computer virus recently shut down uranium enrichment equipment; the inclusion of a soundtrack to the virus – that of “Thunderstruck” by AC/DC blaring from computers – must have rubbed salt in the wounds).
This chapter, as well as this article in the Economist this week, shows the plight of the Iranian people. While Iran is cast as the villain, its own people are the ones who appear to suffer most from its tyranny. But as is the trend of this blog, all roads lead back to energy. So from one shortcoming of the Iranian regime, let us take a look at another – the current impact of oil sanctions on it.
–Current estimates point to Iran losing $133 million a day due to oil sanctions. This is all the more significant when realized that oil accounts for one half of Iran’s government revenues
–Given the current lack of demand for its oil, Iran has tried to idle plants for maintenance to reduce production as much as possible (hark, a 22-year low), putting oil in floating storage after filling up its onshore capacity
–Meanwhile, rising oil production in Iraq means it has now surpassed Iran to become the second largest producer in Opec (behind Saudi). Iraq is now producing over 3 million barrels a day - its highest level in over 20 years – and targets 3.4 million barrels a day by year-end
– Iran’s reliance on oil revenues is a key reason why it targets the highest price for crude out of any Opec member:
–Due to London-based insurers providing roughly 95% of the world’s maritime insurance, all but 5% of the world’s oil fleet is prevented from doing business with Iran due to European sanctions
–This has caused Iran to rename and replace the flags on more than half of its fleet of very large crude carriers (VLCC – seriously) over the past three months in an apparent attempt to bypass US and European sanctions on its crude oil exports
–It seemed last month that China was benefiting from sanctions, as Chinese imports from Iran rose to an 11-month high in June
This all leaves Iran in a rather dour situation. In a country which was already struggling under the weight of the current regime is now a nation seeing inflation at over 20% as the price of meat, rice, and bread spiral higher. The impact of inflation and the unhinged nature of political uncertainty has sent Iran’s currency – the rial – spiraling lower, driving import costs through the roof. This is impacting unemployment, which is also rising (now 13.5% according to national statistics), while economic growth is projected to slow to 0.4% this year.
This volatile cocktail of detrimental factors leaves Iran in an unenviable position, as the influence of the resource it relies on most for its economic strength – oil – is increasingly waning as exports fall. And this deterioration will only continue the longer that uranium enrichment continues and sanctions persist.