Iran’s ‘oil dollars’ could run out completely by December under US naval blockade

Iran’s oil lifeline is shrinking rapidly under a US naval blockade. Crude stored outside the Gulf before the blockade resumed has fallen from about 90 million barrels in mid-July to roughly 29 million now, according to the latest Kpler figures cited by The Wall Street Journal.

Iran has continued loading small amounts of oil inside the Gulf, but those tankers remain trapped behind the blockade line. No Iranian crude shipment has crossed that line since the US Navy resumed the blockade against Iran in mid-July, Kpler data showed.

Iran could use its remaining overseas stockpiles to maintain deliveries of about 1 million barrels a day, most of them headed to China, but the reserves could run out around mid-October. Recovering payment for oil already delivered is also becoming more difficult after new US economic measures targeted banks and financial networks involved in Iranian transactions. The proceeds could be fully exhausted from mid-December, the report said.

New loading has also collapsed. Kpler’s final August figures put Iran’s average crude loading inside the Gulf at 255,000 barrels a day, an 85% decline from the February-to-April average. Iran’s second-largest source of foreign currency, petrochemical shipments, has fallen by about two-thirds since the start of the year.

The blockade is also putting pressure on production. Kpler said Iran appears to be reducing output to domestic consumption levels because its stockpiles are not growing substantially. Truck shipments can carry at most about 40,000 barrels a day, far below the roughly 2 million barrels a day Iran exported before the war. Chinese refiners are reportedly buying more Saudi, Iraqi and Emirati crude instead of Iranian oil as Iranian prices rise.

The economic damage is spreading. Iran’s official inflation rate recently exceeded 80%, while the International Monetary Fund forecasts a 5.4% contraction this year. Capital Economics’ Hamad Hussein said the rial had lost about 15% against the dollar since the Trump administration announced its pressure campaign last month. European Council on Foreign Relations Iran specialist Ellie Geranmayeh said the pressure would hit Iranian households hard, but questioned whether it would force the government to surrender at the negotiating table.

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The pressure will have a significant impact on Iranian households, but I am skeptical that it will make the Iranian regime surrender at the negotiating table.