Iran is reaching out to its old oil buyers and is ready to cut prices if Western sanctions against it are eased, promising a battle for market share in a world less hungry for oil than when sanctions were imposed.
New Iranian President Hassam Rouhani’s “charm offensive” at the United Nations last month, coupled with a historic phone call with U.S. President Barack Obama, revived market hopes that Iranian barrels could return with a vengeance if the diplomatic mood music translates into a breakthrough in the stand-off over Tehran’s disputed nuclear program.
The Islamic Republic’s crude exports more than halved after the European Union and United States, which accuse Tehran of seeking nuclear weapons, tightened sanctions in mid-2012, cutting its budget revenues by at least $35 billion a year.
Last week Iran issued its first tender in two years to import fertilizers, in what traders said could be a test ball for the easing of sanctions on funding import-export operations with the country.
It is also sending strong signals to oil markets about its pricing policies should it make headway in the nuclear talks with the West. The next round of talks with the U.N. nuclear agency is planned for next week.
Only five countries – China, India, Japan, South Korea and Turkey – are still buying Iranian oil. But they are taking just 1-1.2 million barrels a day, about half what Iran shifted before the sanctions were imposed in 2012, when more than a dozen countries were buyers.
All EU countries have stopped purchases, while the United States hasn’t bought Iranian crude for almost two decades.
Arch-rival Iraq, which overtook Iran as OPEC’s second-largest oil producer, said last week China was seeking to steeply raise Iraqi oil purchases.