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US banned the world from buying oil from Iran

01.05.2019
Article from AFRIC Editorial
The history of the confrontation between the United States and Iran dates back many years. But it seems that today “the tension between Iran and the United States reached its apogee”, as this was the headlines of many publications last week.

Donald Trump decided not to extend the exemption granted to eight countries for the purchase of Iranian oil. Such a move could lead to further escalation of tension. Tehran said that if restrictions on oil exports come into force, the transportation of all oil through the Strait of Hormuz, through which 40% of all oil goes, will be blocked. It will be worse than any oil crisis. Recall that the only way out of the Persian Gulf into the Gulf of Oman and further into the Arab Sea and the Indian Ocean is the Strait of Hormuz, through which almost the entire transfer of Middle Eastern oil goes. The overlap of this strait could create a collapse of oil exports for Iraq, Kuwait, Oman and Qatar, which will automatically lead to a crisis in oil prices.

SANCTIONS STORIES

On November 4, 2018, US sanctions against Iranian oil began to operate: you cannot buy it; otherwise the buyer is threatened with secondary US sanctions. Eight countries; importers made up of China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece .The United States allowed them to continue buying oil from Iran, but not to increase purchases under contracts.

China, India and six other countries should completely stop buying Iranian oil on May 4, 2019.  From the statement made by US Secretary of State Mike Pompeo, US Special Envoy for Iran Brian Hook said early April that Iran lost $ 10 billion; Iranian oil production fell by 1.5 million barrels per day from May 2018, more than 100 companies left the Iranian market. Before the introduction of sanctions, in May 2018, Iran exported more than 2.5 million barrels per day. In April 2019, exports did not exceed 1 million barrels per day, and in March was 1.1 million

REACTION IN THE WORLD

The question of whether the United States will prolong the exclusions from Iranian sanctions after May 4 was one of the reasons why OPEC and non-OPEC transaction participants postponed the decision until the end of May to extend production restrictions by 1.2 million barrels per day until the end of the year. The threat of full sanctions on Iranian oil immediately affected the cost of oil, the Brent barrel went up by 2.5% and cost $ 73.81, the WTI barrel by 2.36% and cost $ 65.51.

Turkey has decisively refused to support Washington’s decision to tighten oil sanctions against Iran. Ankara, not only politically, but also purely economically, will not be able to abandon Iranian oil. The Turkish market from Iran receives 27% of the oil consumed in the country and 17% of gas.

From May 4, Turkey will fall under US sanctions, but most likely will continue to buy Iranian oil.

China and India also condemned the actions of the US authorities, but have already begun to buy oil from the same US.

However, the United States, Saudi Arabia and the United Arab Emirates have agreed to take immediate action to ensure that after the disappearance of Iranian oil from the market global oil demand will be met mainly due to increased oil production.

However, many experts doubt that this can be fully implemented, especially against the significant decline in oil production in Libya and Venezuela.

WILL THERE BE A BENEFIT FOR AFRICAN OIL-EXPORTING COUNTRIES?

For the oil-producing countries in Africa, the growing crisis between the US and Iran will be beneficial if there is a rise in oil prices.

On the other hand, production on the African continent accounts for 10% of all the oil produced in the world. But it is worth noting that the number of African oil fields is growing every year. The countries where oil has traditionally been produced are Nigeria, Libya, Gabon and Algeria, recently joined by Egypt, Cameroon, Chad, the Republic of Congo and Sudan.

Today, the largest consumers of African oil are South Africa and the EU countries. However, the increasing interest of China, Turkey and India in African oil can in the long term lead to an increase in the volume of oil produced on the continent and investment in the development of new fields. This is a good chance for the oil-producing countries of Africa, but only time will tell if they can use it.

Article from AFRIC Editorial

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