Resumption of Iranian Oil Exports off to slow start

All this happened before the first Iranian oil tanker reached Europe. Actually, Iranian oil exports to Europe began rising long before the NITC’s resumption of deliveries to the EU.

Iran’s ability to increase oil production and exports beyond current levels does not hinge on the use of its own tankers. A series of other obstacles will need to be overcome. Iran will need to increase its production capacity beyond the current ceiling of around 4 mbpd. To this end, Tehran needs to attract investment and technology from abroad.

According to Oil Minister Bijan Zangeneh, the Iranian energy industry needs some $100 billion in foreign capital. At this point, however, it is uncertain whether and how the administration of President Hassan Rouhani will succeed in luring international energy companies to the country.

Domestically, in order to move forward with the long-delayed new petroleum law aimed at attracting foreign investment and technology — the Iran Petroleum Contract — the Rouhani administration will need to strike a balance. During the sanctions years, companies affiliated with the Islamic Revolutionary Guard Corps and other entities linked to the conservative camp moved into Iran’s energy industry.

Considering their political influence within the Islamic Republic, their consent and participation in the development of the Iranian energy industry will be necessary for the law to proceed. Tellingly, the first and thus far only such contract has been awarded to an entity overseen by Supreme Leader Ayatollah Ali Khamenei.

Internationally, Iran must convince foreign companies to engage in its energy sector by concluding binding contracts rather than what has largely been offered thus far: non-binding memoranda of understanding. This change has become more difficult as the Trump administration has increased harsh rhetoric toward Iran and, within weeks of taking office, already imposed new sanctions — though in response to an Iranian missile test. As such, uncertainty over the future of the nuclear deal has increased.

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