With Japan as a major customer for Iranian oil, the renewed discussions on sanctions with no waivers has Washington and Tokyo sitting at the table, working out details. And now that India, Japan and South Korea are all dialing back their purchases of oil, the US attempt to cut off Iranian such exports seems to be working. We have, on our platform, discussed the new global weapon that the US and her allies are using a lot more recently – oil. The US has been exporting oil and natural gas to Asia with China, Japan and South Korea as targets. Saudi Arabia and Iran seem to be losing market share in the region.
Japan and the United States have been in discussions, according to sources, since the US asked its allies to stop importing Iranian oil back in November. Chief Cabinet Secretary Yoshihide Suga for Japan mentioned in a news conference that Japan was in talks with the US on the impact of sanctions with Iran but there have been no details presented to the public. Iran is the third-largest exporter among the OPEC, the Organization of Petroleum Exporting Countries – mainly the Middle East and Venezuela make up this group. And let`s be clear, the US is starting to take market share in Asia after lifting a 40 year ban on oil exports.
Iranian oil shipments to Japan and South Korea increased to a high of 700,000 BPD (barrels per day) in late 2016 after sanctions were lifted that same year. According to CNBC the number has fallen to around 200,000 BPD recently. The question is now clear – will India, Turkey, Japan and South Korea all reduce imports of oil from Iran as the US applies pressure? More importantly, will the US and Canada step in to fill that gap as they export more oil to said countries? North American oil, especially US oil is now flooding the world market. In 2018, the US will surpass Saudi Arabia as the number one producer of oil globally.
The key question here is how will the US and Japan work together on energy in the future. Also, oil revenue accounts for a major part of GDP in Iran which is 60 percent centrally planned. Of course it is dominated by oil and gas production, with the total value of its natural resources, in 2016 prices, at US $27.3 trillion.
Here at Classiarius, we see growing challenges for Iran as it extends its power in the region, again checked by Saudi Arabia and other neighbors.