Category Archive: Iran

Iran is covered in this archive through the mechanics of its oil trade, because that is where the country's exposure to external pressure is concentrated and where the observable evidence actually exists. Rhetoric on both sides is abundant; settlement terms, export volumes and discounts are the numbers that move.

The currency question

In 2010 Iran's vice president said the country was free to choose any currency for crude sales and that the important thing was to exclude euros and dollars. Read carefully, that is a statement about banking rather than about pricing. See Iran to Shun Euro, Dollar in Oil Deals.

Oil is quoted against dollar benchmarks and settled in whatever currency two parties agree on. What the convention actually determines is which banking system the payment passes through — and a payment in dollars clears through institutions within reach of American financial measures. Changing the settlement currency is an attempt to move the transaction out of that jurisdiction, not to change the price of the barrel.

Why the alternatives are hard

The obstacle is market depth rather than political will. A currency of trade must be one in which a producer can hold large balances, borrow against them, hedge and spend. Very few currencies offer that, and those that do belong to the states applying the pressure. Barter, third-country intermediaries and non-convertible balances all exist as workarounds, and each imposes a discount — which is the measure's real effect: a tax, not a cut-off.

The buyer's arithmetic

A seller's decision is only half a transaction. Refiners taking Iranian crude are concentrated in Asia and each weighs the discount available on a cargo against the risk to the rest of its business. That asymmetry is why announcements of this kind move less than they promise, and why the observable outcome is usually a workaround at the margin rather than a change in how the trade is denominated.

Reading pressure honestly

Assessing any sanctions regime requires a counterfactual that does not exist, so the debate substitutes proxies — exchange rates, export volumes, rhetoric — all of which are noisy and all of which are cited selectively. This archive reports the mechanism and the observable numbers, states what would count as evidence either way, and declines to declare success or failure on a timescale that cannot support the claim.

Production and export data are published by the US Energy Information Administration; producer policy is documented by OPEC; and the nuclear questions underlying the sanctions architecture are reported by the International Atomic Energy Agency.

Browse also: Sanctions, Energy, the July 2010 archive, or the front page.