...
By Tom O'Connor
Deputy Editor, National Security and Foreign Policy
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
The United States has temporarily lifted sanctions against Iranian oil exports amid progress in negotiations toward ending the nearly 4-month-war that has wrought chaos on the international energy market.
The decision marks a reversal of the traditional approach by President Donald Trump, who has long sought to restrict the Islamic Republic's trade through tough sanctions adopted since his initial withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal during his first term in 2018.
Those restrictions have not only throttled Iran's export options to a few select buyers—predominantly China—but also forced Tehran to sell at a steep discount and do so via costly workarounds.
Read More on News
But the U.S. Treasury Department announcement Monday of a new license "authorizing the production, delivery and sale of crude oil, petrochemical products, and petroleum products of Iranian-origin through August 21, 2026," has the potential to substantially boost Iran's connectivity to the global economy.
Brett Erickson, a geopolitics expert and managing principal of Obsidian Risk Advisors, is among the analysts who have run the figures.
The result: Iran has the potential to earn around $37.4 million to $51 million per day, or roughly $2.24 billion to $3.06 billion over the 60-day waiver period, assuming it is able to sell all available oil during that time.
However, he says there's more to the story.
“The political rhetoric suggests Iran just won the lottery. The reality is far less dramatic," Erickson told Newsweek. "Tehran was already selling oil; it was simply paying a sanctions tax in the form of discounts, shadow shipping, and financial laundering costs.
"The waiver doesn’t create a new revenue stream, it makes an existing one far more profitable.”
...
Behind the Numbers
Erickson said he came to the conclusion by calculating a number of variables associated with anticipated shifts in Iran's oil trade as a result of the waiver.
For one, while the price of Brent oil was around $66 per barrel in the leadup to the war launched by the U.S. and Israel on February 28, Iran had been selling at a roughly $10 per barrel discount. Now, Tehran is selling at "near-parity," Erickson noted, with any expected price fall as a result of prolonged sanctions set to kick in after the waiver period.
Under General License U issued by the Treasury Department in March, "we saw Iranian oil fetch a $4-$5/barrel premium to Brent," Erickson noted. This number, he argued, "is a reasonable expectation" for the new General License X, "due to the increased purchaser pool competition driving up prices from demand."
"From this, we can reasonably calculate that Iran would see roughly [optimistically] a $5/barrel relative increase in revenues," Erickson said.
The other factor he took into account was additional "realized revenue" based on an easing of Iran's intricate network of shadow fleets that involves murky costs allocated to dodging sanctions, exploiting loopholes and paying off third parties necessary to ensure the blacklisted cargo reaches its destination.
"Under normal conditions, Iran needs to ship on shadow fleet tankers, with either elevated or non-existent insurance, and then launder said proceeds through their shadow banking systems of front and shell companies via offshore jurisdictions or secrecy jurisdictions," Erickson said. "This involves paying middlemen, lawyers and experts, and the costs of set-up.
"Reasonable estimates as to the costs incurred per barrel to do this is around $7/barrel per my estimates. In total, Iran would see a 'realized revenues' shift of ~$11/barrel."
On the supply side, he estimated that Iran currently has access to around 180 million barrels of oil, divided between 95 million outside of the now-lifted U.S. blockade line in the Persian Gulf, 25 million within the line and roughly 60 million held in onshore storage.
The conflict and U.S. blockade measures had reduced Iran's production to around 2.3 million barrels per day, 2.1 million of which was for domestic consumption, leaving just 200,000 barrels in excess. With Iran now steadily ramping up production, Erickson found that the country could conceivably pump this figure up to 500,000 export-ready barrels per day in addition to the 180 million already available for shipping.
Given that the journey takes an average of 17 days to reach destinations, he also factored in that Iran likely had 43 days out of the waiver window to reap the benefits.
"This means that ~21.5M barrels can be produced and sold beyond their already existing capacity," Erickson said. "In total, that means Iran can sell ~201.5M barrels under the GL-X window… if they sold literally every barrel. This equates to 3.36Mbpd.
"Assuming that Iran is able to sell at a rate of ~2.3M barrels per day, or 70 percent of total available supply, at an $11/barrel realized revenues increase, that would mean that Iran can earn ~$1.5B more than they would if sanctions were in effect."
The Long-Term Impact
Erickson was cautious to assume that the immediate boon would translate into prolonged gains.
"Let’s assume they sell literally every barrel…what are their revenues going to look like that next month? Production won’t be anywhere close to pre-war levels, so they’ll fall off a cliff," Erickson said.
Even if the waiver were to be extended for a full year, he felt a figure of around $10 billion would constitute the "absolute upper limit of reality," as opposed to the "massive economic boom" some have speculated.
Ben Cahill, nonresident senior fellow with the Atlantic Council Global Energy Center, said what happens after the waiver period would prove most consequential.
"I don't think much will change in the next 60 days," Cahill told Newsweek. "The key question is whether Iran can sell more oil outside of China. Buyers elsewhere now have a green light to buy Iranian oil and to pay in U.S. dollars, but it takes time to arrange deals, financing and all the logistical and payment details. I'm not sure they will jump immediately. And this Treasury waiver could be revoked or changed depending on the course of the peace talks.
"The real significance is what happens after the next 60 days."
He pointed out that the memorandum of understanding signed separately by Trump and Iranian President Masoud Pezeshkian last Thursday included a Trump administration commitment to work toward ending U.S. and U.N. Security Council sanctions targeting Iranian oil exports.
Should the Treasury license ultimately become lasting policy, "that would mean a revenue windfall for Iran—and on an ongoing basis, rather than a one-off release of frozen funds," according to Cahill.
"My own estimate is that Iran could earn another $35 billion annually in oil revenue over 2025 volumes, if this 60-day waiver becomes permanent," Cahill said. "That's based not on oil currently at sea and in storage, but rather on a return to average export volumes from 2015-2017 [the JCPOA period], a Brent crude price of $70 per barrel, and a continued $5 per barrel discount.
"I think these are conservative estimates."
View 0 Comments
Submit Correction
View Editorial & AI Guidelines