Top Ten Ways Iran is Defying US, EU Oil Sanctions and How You are Paying for It All

It wasn’t supposed to be like this, the Neocons assured us. Iran would soon be on its knees because of ever more stringent US sanctions on Iran. But Iran just cheekily sent two warships through the Suez Canal to dock at the Syrian port of Tartous. The old Mubarak government in Egypt might not have allowed such a thing, but the Arab Spring has brought to power an Egyptian government eager to demonstrate its independence from Washington.

Brent crude just hit $121 dollars a barrel, the highest in 8 months and a remarkable figure in the absence of a crisis like the Libyan War (responsible for the last big spike). In part, the markets are jittery at the news that Iran is cutting off oil deliveries to the UK and France (Iranian petroleum accounts for only 1 percent of UK imports, and 4 percent of French ones). The Europeans will just find other suppliers or will end up buying Iranian oil through third parties, so the announcement isn’t that significant, but oil traders are a jittery lot. The oil sanctions plan foisted on the United States by Israel and the US Israel lobby pledged that the sanctions would not put the price of oil way up. But in fact, they have contributed to higher prices in part because of speculation on war talk.

As prices in February hit a historic high for this time of year, presaging perhaps $5 a gallon gasoline this summer in the US, Iran is still sitting pretty. The fragile European and US economies, however, may take a hit from higher transportation costs (the US will likely see a fall in summer travel and internal tourism). The same Republicans who complain that President Obama hasn’t been hard enough on Iran are cynically planning to campaign against him on his having caused higher petroleum prices, ignoring the role of sanctions on Iran and tensions with that country in the price run-up! I hate to say it but I told you so.

So what has allowed Iran to fight back against the draconian US-Israeli-European sanctions regime?

10. US and European Union financial sanctions look set to cut Iran profits on its petroleum by roughly 10 to 15 percent by raising transaction and insurance costs. But Iranian saber-rattling about the Straits of Hormuz, for instance, along with Israeli and American warmongering rhetoric, has caused a 10 to 15 percent increase in petroleum prices on speculation over hostilities. That is, from Iran’s point of view the negative effects of the sanctions on oil profits have been cancelled out by the positive effects of the war talk.

9. The sanctions plan against Iran advocated by Israel-lobby intellectuals Mark Dubowitz and Reuel Marc Gerecht (a former CIA analyst) was deeply flawed because it did not take into account the likelihood of supply disruptions (South Sudan, Syria) or of increased demand (India, Japan, South Korea, China), as John Kemp cannily explains.

8. Saudi Arabia has been unable to ramp up production quite as much as it boasted it could to US and European allies. In part, Saudi’s reserves are declining by 3% a year, which few analysts seem to have taken into account.

7. South Sudan abruptly halted petroleum exports through Khartoum in a dispute with Sudan over its “theft” of some of the oil. That step took 350,000 barrels a day off world markets.

6. Likewise, Syria’s uprising has closed down oil production of nearly 400,000 barrels a day, and there have been problems in Nigeria. Thus, not only couldn’t Saudi quite add 2 million barrels a day to world production, but its increased output was in part offset by cutoffs elsewhere.

5. India has insisted on continuing to buy Iranian petroleum and on trading with Iran, much to the dismay of the US government. But given the tightness of world petroleum supplies and increasing Asian demand, it is difficult for me to understand why Nicholas Burns thought Delhi could do without Iran’s petroleum. In part, making sure consumers have subsidized petroleum is an election issue in India

4. South Korea and Japan don’t believe that they can replace Iranian petroleum imports from other suppliers, and so have politely told Washington and the Neocons to jump in a lake over boycotting Iranian oil.

3. Turkey is also bucking US pressure to buy from Saudi Arabia rather than Iran. Some analysts doubt that Saudi Arabia can keep up its current 11.8 million barrels a day, and if the output fell, Turkey might be scrambling for new contracts in an even more competitive world of six months or a year down the road.

2. Iran and China have agreed on an oil deal that will boost Chinese imports from Iran. China has been completely impervious to Washington’s attempts to strongarm it into compliance with the US boycott of Iran.

1. Iran is still being supported by its neighbors, who need its aid. Iraq wants a waiver, being deeply dependent on trade with Iran. And, at a tripartite summit between Afghanistan, Iran and Pakistan, Pakistani president Asaf Ali Zardari underlined that outside pressure could not undermine good relations between Islamabad and Tehran! Pakistan has an energy crisis and is seeking electricity and fuel from Iran. So, basically, US allies Afghanistan and Pakistan are paying no attention to American attempts to get them to join a boycott of Iran; in fact, they are openly defiant on this score. The three are even talking of some sort of regional bloc that would include China!

The last crackpot Neocon plan, the invasion of Iraq, ended up costing Americans about $1 trillion so far and nearly 5,000 soldiers killed. their Iran gambit looks set to triple all the costs of the Iraq fiasco, or more. Write your congressmen and put blame where it is due, on AIPAC.

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34 Responses

  1. Oh! This devious Iranian plot, to destroy the US through financial ruin by forcing the US to surround Iran with expensive military bases, is far more nefarious than I had imagined.

    It is now clear that Iranian Islamist fundamentalists have forced the US to intervene in nearly every country in the world, and to spend trillions of dollar borrowed from China, which we will never repay, all to prevent Iran from gaining permanent nuclear-based energy independence.

    Write your congressman and tell them that Iran has beaten us, and that AIPAC should just shut up because Israel is destined to evaporate (my term for Israelis fleeing back to Long Island) when the money runs out.

    Israel’s continued belligerence is something we cannot, literally, afford.

    • Osama Bin Laden repeatedly stated that he wanted to inflict economic damage on the West. Make fighting al-Qaeda cripplingly expensive. It’s not so implausible then, that the religious fundamentalists in charge in Iran could have similar hopes of the west breaking their own economies in their effort to sanction Iran.

      • Says the defense lawyer, cross-examining the State’s chief forensic pathologist, “Then it is possible, isn’t it, that the DNA you have stated belongs to my client, to a 99.998% statistical certainty, could in fact belong to someone else altogether? Answer yes or no, it’s a simple question.”

        And are you saying that was what Osama was all about? Nothing to do with Palestine or imperial odysseys into Oil Country?

        Yep, the Brilliant Mullah Defense is “not so implausible,” I guess. At least it casts Reasonable Doubt on a maybe more likely interpretation of the forensic evidence. The Real Stupid is the idea that fighting “al Quaeda,” that conveniently sinister, alien moniker, can only be done by blowing trillions of dollars into sowing the dragons’ teeth that are springing up now, when the real effective anti-terrorism has been almost exclusively plain old beat-cop-and-smart-detective police work. All that money, and no more to show for it in “increased security” than all that money smoked up in the Great Prohibition Thingie called so disingenuously the “War on Drugs” has done, damn-squat, to reduce the consumption of recreational chemicals.

        The REALLY Real Stupid would be that the Mullahs were actually prompting that sneaky variant of the Game, and OUR Mullahs were stupid enough to bankrupt us, fiscally and morally, by snapping at the gambit to further their own little fiefdom ambitions. Actually, the latter part does not even require the former to be “true.”

        It will be interesting indeed if it proves to be the case that the Mullahs are as astute at jerking the chain of the Imperial Behemoth as the Israeli leaders (and the C-Suite suits of the MIC) have been.

  2. “3. Turkey is also bucking US pressure to buy from Saudi Arabia rather than Iran. Some analysts doubt that Saudi Arabia can keep up its current 11.8 million barrels a day, and if the output fell,

    Saudi Arabia over produces its wells. Someday, the fields will collapse. Production will not fall slowly, it will stop.

    • To meet its contractual obligations, Saudi Arabia is having to reactivate their oldest wells even though they produce very little.

      All production data from the last five years clearly indicates that the Saudis are at their Peak Oil moment. It is very likely that the Saudis will never produce any additional oil and in fact over the next year production will start to decline no matter what technology they try.

      I suspect the King has known for a few years which is why he has tried to neuter the religious fundamentalists and tap into the only other resource KSA has, its people (all the people – both male and female!).

  3. “But Iranian saber-rattling about the Straits of Hormuz, for instance, along with Israeli and American warmongering rhetoric, has caused a 10 to 15 percent increase in petroleum prices on speculation over hostilities.”

    Perhaps we should impose a 15% “mouth tax” on AIPAC, whereas 15% of every dollar they spend lobbying congress goes towards some humanitarian need, such as food and shelter for Syrians.

  4. If only an article like this could be featured on the nightly news or discussed on one of the Sunday morning news programs. Americans need to know they may be paying $6 a gallon thanks to the Israeli lobby and our spineless politicians.

  5. For Netanyahu also there are advantages to the high oil prices he has in part caused; it helps undermine the re-election of a man he despises in favor of nominees who have said they will blindly do Israel’s bidding.

    • I wonder is Saudi Arabia also would not mind having a Republican president of the US, and thus is not not willing to draw down its oil reserves to aid Obama…. Hhmmm.

  6. Check out Arthur Silber’s two articles on the subject. In the first one he shows how the US rhetoric against Iran is in fact about the US. It is US’s decline that is the issue.

    In the second article he calls for an all out Occupy the government to get the attention of the US government to NOT invade Iran. This must be first based on education since the US public has never heard an alternative point of view because our leaders don’t have one.

    Maybe Silber can write a column here. Maybe he already has and I missed it.

    link to

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  7. Gasoline prices going to climb higher?


    I like the upside: Gives the country and entrepreneurs extra incentive to finally figure out energy alternatives. It’s exactly this absurd dependence on oil that has perverted our foreign policy.

  8. “Saudi‚Äôs reserves are declining by 3% a year.”

    Is this the long-awaited prediction of the end of easy oil (30 years out at VERY MOST) or is this just another in the long, long, long chain of predictions of the end of easy oil. (I am not a fan of oil, having become a Global warming cultist.) Tar sands, here we come! Ugleeeee.

    • It is an indication that another oil production area is right on schedule for the Hubbert Curve. All production data indicates that virtually all global production areas are at or past their peak production, meaning that global Peak Oil just may hit in 2020 as many have been predicting and China has been using as a planning date.

  9. Your headline seems to imply that we are paying for Iranian defiance, while I think you meant to say that we are paying for the imposition of sanctions that would never work in the first place.

  10. The old Mubarak regime — like the current regime in Egypt — would have had no choice in the matter. Egypt is obliged to allow Iranian warships to pass through the Suez Canal. Under the terms of the international treaty respecting the free navigation of the Suez Maritime Canal, which has governed the Canal’s operation since 1888, the Canal “shall always be free and open, in time of war as in time of peace, to every vessel of commerce or of war, without distinction of flag.”

    Iranian warships last passed through the Suez Canal just a year ago, in February 2011. The Americans and the Israelis weren’t pleased, but there was nothing they or the Egyptian authorities could do to stop the vessels from proceeding. All the Iranians had to do was to provide 24 hours’ advance notice of their intended passage.

  11. 1) Firm oil prices indeed will help to stabilize the world economy by slowing down deflation in addition to promoting investment in green energy.

    2) Oil sanctions are design to put a nose ring through the nasal septum of China. When all the Iranian oil is going to China then China is under control.

    3) There is a serious oil bubble out there. Military industrial complex depends on proceeds from oil revenue. Iran may be even an excuse here. Higher oil prices for an extended time may be a goal by itself. Even after the regime change in Iran it will be very difficult to remove the oil sanctions.

    4) Oil is a bloody commodity. Oil empowers the rich, the middle class, and the slaved upper poor to consume resources and not leave anything for poor people who earn below $1 a day. There must be a cap on consumption of oil worldwide until no one is below the poverty level.

  12. I simply can’t believe that so many countries are ratcheting up sanctions against Iran merely as a favor to “the Zionist lobby”. Many of these countries don’t particularly like Israel. It is OBVIOUS that there are other powers at work, who fear Iran at least as much as Israel does, and that think that there is a REAL threat from Iran that Westerns don’t understand (possibly the Shia-Sunni split). I think the Gulf States are likely candidates for the source of this fear and pressure.

    • Actually Israel is at the root of it. Christian and Jewish Zionists in US have out-sized influence on US government in this regard, US government has outsized influence on Europe. Note that where US is not influential, no one is going along. Saudi Arabia and European Islamophobes are junior partners.

      • Why sanctions ARE working:

        1. Iranian rial has devalued by almost half
        2. Major importers of Iranian petro monopolize Tehran’s exports. China is now forcing significant discounts on Iranian imports. Half of Indian sales will now be purchased with the rupee, thus restricting Iran’s India revenue to only be allocated toward India.
        3. Although a delaying tactic as per usual, in the same fashion that Pakistan did (as explained to me by a former Pakistani official), Iran is now willing to negotiate with the P5+1.. why right now?

        You constantly label the USG as being subservient the Israel lobby. I would argue that war has not occurred with Iran due to the USG’s refusal to acquiesce to the lobby’s wishes. The pressure is indeed significant, however the lobby will not have its way because of its lack of influence.

        • Not sure why devaluing of rial against dollar so important if they are accepting rupees. Since they do buy made goods from India, rupees can be recycled. Not exactly a big victory.

          Sanctions have hurt the Iranian economy. Sanctions have not crippled Iran.

          AIPAC doesn’t always get its way. It only mostly does.

    • “other powers…who fear Iran”? What kind of “fear?” What basis — some kind of change to a personally beneficial status quo? What “interests” (a moral-smokescreen word in its own right) might be “threatened?”

      Is there a snowball’s chance that all those “interests” might ever develop and grow up and grow past the rather infantile ME-ME-MY-MINE level we humans seem to be stuck at? Rhetorical question, probably…

      • Well, who wouldn’t fear a nation which hasn’t taken aggressive military action against another nation for, oh, about 2oo years?

        As opposed to the USA, which seemingly hasn’t encountered any nation it won’t attack in some form. Those with nuclear bombs do get some forebearance from the bellicosity of the US.

    • Answer, Ike?

      The Saudis felt safe when Saddam Hussein ruled Iraq.

      We removed Saddam. Then we told the Gulf states that our failure to stabilize Iraq was Iran’s fault. So they’re stuck having to help us manufacture a Sunni buffer zone. It’s also a fantastic way for oil-free Jordan to get back on the US aid gravy train after the late King sided with Saddam Hussein against Kuwait.

      But that creates mischief for America too. We handed the Saudis a vested interest in intervening in Bahrain and Syria. Since the Saudis keep OPEC operating in US dollars, which pressures the oil states to have to invest in the USA, we can’t have everything our way with the Saudis.

      In fact, the Gulf states have not shut down relations with Iran, which you would know if you read the Asia Times. It was there alleged that the Bush administration sabotaged a grand settlement Saudi Arabia had negotiated with Iran about 6 years ago to end all regional disputes between them. That made the current hysteria possible.

  13. This news is all good for Stephen Harper and his tarsands. The more filthy oil we can sell overseas, the more jobs we will create in the tarsands and environs. Canadian drivers will suffer, of course, but they are of no concern to Harper.

    On the bright side, maybe more Canadians will give up their cars and start taking public transport.

    • Well, Delia, you Canadians could get rid of Harper immediately by uniting your four left-of-center parties to stop his noisy minority from dismantling your healthcare system. This is the downside of multiparty systems; they don’t know how to respond to a crazed high-turnout minority that wants to permanently overthrow the values of the society.

  14. I read an article where some US rep went to South Africa asking authorities there to stop importing Iranian crude. After some study the South Africans concluded they could comply but there would be a 44 million dollar conversion cost to be borne because Iranian crude is of the “sweet, light” variety that requires minimal refining. As I understand it any additional supplies out of Saudi Arabia is of the thick,heavy stuff which only a few refineries can process.

  15. Seems to me we are, as a species, too dumb to see how mutually vulnerable we have become. A few of us have figured out how to sucker the rest of us into creating a nice profitable powerful little nest for them to operate their little stupid games in and get rich beyond filthy. And the rest of us are waking up, getting an inkling, seeing dimly that we are being had, screwed, maybe feeling a slightly different kind of fear than the one the Kleptocracy foments of “this that or the Other,” and beginning to sense that we are being done to, and out of, on a planetary scale.

    Likely endpoint? link to I suggest reading all the links from the home page. Satire, fairly well done, with the bit of horror, that fear of the unkillable evil, that’s inherent in all good satire.

    Too bad there’s no power or profit in simple things, like “Do unto others as you would be done to,” and “Can’t we all just get along?”

    Where’s Will Rodgers, or George Carlin, when we need ’em? Shut up in Guantanamo?

  16. What an incredible assertion, a disappointing exercise in greedy reductionism. Our allies regularly disregard US interests when they conflict with their own.

    EU criticism of sanctions have been quite vocal, and quite commonly include accusations of hypocrisy as the US does not support EU desires for sanctions on Israel. EU Member States have threatened counter response in the WTO. ILSA particularly is one of their regular targets.

    AIPAC could disappear off the face of the Earth tomorrow and there would be no radical change in ME politics.

  17. The only good news is Pakistan’s support of Iran and India’s disregard of the sanctions. Maybe that will be deterrent, this is such a repeat of Iraq!

  18. An interesting read. I discovered this blog only now, but looks like I’ll have some more reading through the archives to do for the rest of the week :-)

    I was just wondering, would it be possible to point to the source for the following statement:

    > In part, the markets are jittery at the news that Iran is cutting off oil deliveries to the UK and France (Iranian petroleum accounts for only 1 percent of UK imports, and 4 percent of French ones).

    Just wondering :-) Reading the newspapers here today (in Belgium) would’ve led me to believe quite the opposite!

  19. Seems to me as a repeat of the Iraq war sell, searching for imaginary WMDs.
    When Ahmedinejad says they have no military nuclear programme, it’s probably true.
    USA & Israel will certainly not find any Weapons of Mass Destruction in Iran either.
    And Iran is definitely a potentially hell of a lot worse quagmire than Iraq.
    (De’ja wu)

  20. Very interesting article. Ended up here from the copy made on the OilPrice website. This deserve to be on some major newspapers. I never heard of Mr.Cole before but you got my attention I will follow on subsequent posts. A lot of earlier reading to do too, like Steven mentioned above. P.S. While they are talking about starting a war with Iran, here comes this jewel of movie “The Separation” from Iran (en route for the Oscar of the best foreign film of 2011) presenting a stunning view of the life in this country torn ed between two era. There are not so different then all of us and aspire at a peaceful and productive life. Big changes is coming from the next generation and that is why we should leave this country alone and help them instead of threaten them.

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