Iran Exports Millions of Barrels of Oil, 90% Bought by One Country

China has become the main buyer of Iranian oil in recent years. The dominance is underpinned by 90.8% of Iran’s oil exports flowing to China, with export value around US$32.5 billion or about Rp 549.3 trillion (US$1 = Rp 16,900). Meanwhile, only a small portion of Iran’s oil is sent to other countries such as Syria, the United Arab Emirates, and Venezuela. Referencing data from the Energy Institute, Iran is estimated to produce 5.06 million barrels per day. A small portion is consumed domestically, at about 1.95 million barrels, while the remaining around 3.11 million barrels per day are exported. Western sanctions reshape the trading map. As a result of sanctions on Iran’s nuclear programme and various trade bans on Iran imposed by the United States, many Iranian trading partners have started to reduce or halt their economic ties. As a result, many countries have stopped importing oil from the country, causing Iranian oil exports to concentrate further on a handful of buyers willing to take on sanctions risk. China has emerged as the biggest beneficiary of this situation. Many independent refineries in China buy Iranian oil because it is cheaper than other Middle Eastern oils. Iranian crude is typically traded at a discount of about US$3-9 per barrel compared with Brent. This price discount is possible because the cost of producing Iranian oil is relatively low, even as low as around US$10 per barrel, far below Brent around US$60 per barrel. However, this discount strategy actually entails a large opportunity cost. Tehran is estimated to lose billions of dollars in potential revenue each year. But the move is driven by necessity to preserve exporting markets that are increasingly limited due to international sanctions. New dependence in the energy market. Iran’s dependence on China creates a highly asymmetric relationship. On one hand, Iran needs the Chinese market to maintain income from the oil sector. On the other hand, China obtains energy supply at cheaper prices while increasing its hegemony in the Middle East. Amid ongoing international sanctions, Iran is also developing various strategies to preserve its oil exports. Some include the use of a ‘shadow fleet’ (tankers changing flags or identities), ship-to-ship transfers at sea to conceal the oil’s origin, and altering cargo documents to appear as if sourced from other countries.