Selling oil on the gray market at the time of the sanctions was one of Iran's options to keep its market share as well as foreign exchange earnings, so that by selling Tehran at a discount, Tehran could use it to improve Iran's economy, which has been hit by sanctions.
Despite US demands to China over cheap Iranian oil during the sanctions period, Beijing continued to buy Iranian oil, although in recent months the Biden government has given the green light to encourage Iran in the nuclear talks to reach a new agreement.
With the increase in the purchase of Iranian oil, Iran's economic conditions will improve and the conditions for signing a new agreement will be provided. The situation in the world energy market changed after the Russian invasion of Ukraine.
US and European sanctions on Russia have made it harder for Russia to sell oil, and Moscow has offered discounted oil sales to countries such as China and India to continue selling oil.
Iran-Russia Competition
Earlier in May, Bloomberg reported that Russia was selling its oil with a $ 30 discount on oil sales, while Iran announced a $ 20 discount on oil exports to brokers. In recent weeks, some experts have made it clear that Russian oil has become a competitor to Iranian oil.
In the last week of April, Russia's state-owned Rosneft failed to sell 37 million barrels of oil from the country's western ports and did not find a single oil customer. Of course, the main reason for the failure was that in the tender for the sale of oil, the precondition for payment was set in Russian rubles.
Russia produced 11 million barrels of oil and gas condensate per day before the invasion of Ukraine. It also exported 4.8 million barrels per day of oil and gas condensate, along with about 3 million barrels of oil products.
About half of these shipments went to Europe and the United States, while the eastern markets, especially India, South Korea, and Japan, each Which supplied only 3 to 6 percent of their oil needs from Russia, and Russia's share of China's oil imports was about 15 percent.
About half of Russia's exports depend on oil and gas; Last year, the country exported $ 110 billion worth of crude oil, $ 64 billion worth of oil products and $ 62 billion worth of gas.
Looking for Buyers
Reuters reports that China tends to buy cheap Russian oil, a move that has significantly reduced Iranian oil sales to this large global economy. Shargh newspaper which publishes in Tehran also expressed concern about the seizure of Iran's steel export market from Russia.
Reuters reported yesterday, May 19, that Russia's significant rebates have led to a sharp drop in Iranian oil exports, with 40 million barrels of Iranian tankers waiting to find a customer in East Asia.
The report quoted trade sources and tanker tracking companies as saying that since Russia's invasion of Ukraine on February 24 and Western sanctions against Russia, the country has offered significant discounts to customers to replace Asian markets with Western ones, so much so that China has preferred Is to procure its oil from Russia instead of Iran.
According to a report by Reuters, 20 huge Iranian tankers with 40 million barrels of oil shipments are currently anchored in Asian waters, including Singapore, and are looking for a customer.
Rivalry heats up
Earlier in the day, Iranian Oil Minister Javad Owji claimed that Russia had offered discounts to oil buyers, but that given Western sanctions against the country, finding a customer for Russia. "It takes time for the Russians."
The latest statistics show that Iran's oil exports to China before the crisis in Ukraine reached 700 to 900 thousand barrels per day, which is estimated to have fallen to 200 to 250 thousand barrels per day in April
Given that Russia's invasion of Ukraine continues and sanctions against Russia's energy industry will continue, Iran needs to reach a new agreement with the 4 + 1 to maintain its share of the Chinese energy market. Any delay in signing a new nuclear deal would mean a worsening of Iran's economic situation.
Russia will use all available means to increase oil sales at great discounts to China and its other traditional customers. Contrary to the claims of the Minister of Oil of Iran - Tehran cannot easily find new export destinations for Iranian oil during the sanctions unless it wants to compete with Russia in the gray market with a greater discount.
Beijing and other major oil consuming countries in the region are winning the cheap oil competition between Iran and Russia in the gray market. If Iran continues to sell oil on the gray market to circumvent sanctions, only the interests of stakeholders will be served.
The Ibrahim Reisi administration will not have an easy task ahead of the competition in the global energy market.
Dr Umud Shokri, Author of "US Energy Diplomacy in the Caspian Sea Basin Changing Trends Since 2001", Foreign Policy&Energy Consultant.
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