The government of Iran said today that if sanctions against the country become any more stringent, Iran would stop its exports of oil and that the country could survive without oil revenues. Sanctions against the Islamic Republic have tightened as the United States and other nations attempt to force Iran to stop developing its nuclear energy program.
Depending on the source, Iran is currently producing anywhere from 4 million barrels of crude a day (official Iranian number) to around 2.72 million barrels a day (OPEC’s October Oil Market Report). The threatened export stoppage does not appear to include blocking the Strait of Hormuz.
Iran’s oil minister is cited by Reuters:
We have prepared a plan to run the country without any oil revenues. So far to date we haven’t had any serious problems, but if the sanctions were to be renewed we would go for ‘Plan B’. If you continue to add to the sanctions we (will) cut our oil exports to the world.
While these may sound like brave words, it is worth remembering that the country does have about $70 billion in foreign exchange credits that it can still get its hands on and a stash of approximately 900 tons of gold. The country’s total economy is below $500 billion, even with oil exports.
If Iran could survive, what about the rest of us. Global spare capacity is almost entirely held by Saudi Arabia. Because the Saudis and the Iranians have contested for primacy in the region for decades — if not centuries — it is reasonable to assume the Saudis could make up 2.7 million barrels a day, but 4 million would be a stretch. If that were to happen, the Iranians could again threaten to block the Strait of Hormuz, through which much of Saudi Arabia’s oil is shipped.
The story appears to be having no impact on crude prices, which are down more than 1.5% so far today.