US embargo on Iran oil takes a bite out of Tehran's exports

An American ban on purchases of Iranian oil has triggered a sharp decline in that country's exports. Iranian oil sales stand at less than 1.5 million barrels a day, down 500,000 barrels since August, oil industry figures show. Western diplomats in Tehran say that if this trend continues, it is likely to seriously reduce Iran's oil income in coming months and hobble that nation's war effort against Iraq.

According to these diplomats, the four-week-old US embargo has had more success in disrupting Iranian oil exports than Iraq's air raids against Iranian tankers and oil installations.

Since August, Iraqi air raids have aimed to stem the flow of Iranian oil. Western shipping sources in the Gulf say at least six of the 20 tankers leased by the National Iranian Oil Co. (NIOC) to operate a shuttle between its oil terminal on Kharg Island and its loading facilities have been seriously damaged.

But one source says: ``Iraq is pursuing a costly and ineffective policy. The Iraqis fired dozens of [missiles] since early September, but the flow of Iranian oil has continued unimpeded. Iran even has large surpluses.''

Indeed, European oil traders say they have been showered in recent weeks with phone calls and telexes from NIOC officials offering large quantities of crude oil at discount prices.

``When the Iranians lost access to the US market they began to ship part of their production at their own expense to Europe and tried sell it at $16 per barrel,'' a European oil company executive says. He estimates that before the embargo, Iranian oil exports to the US totaled 300,000 barrels per day.

``But even at discount prices the Iranian surpluses don't sell,'' the executive says.

US pressures have also indirectly provoked a 50 percent decline in Iranian crude exports to Japan, he says. Japanese oil industrialists, apparently irked by Iranian efforts to sell surpluses at discount prices on European markets, are asking for a renegotiation of purchase contracts. The Iranians have reportedly refused, prompting the Japanese decision to cut imports.

On Oct. 31, the Japanese government officially refused to impose any economic sanctions on Iran for its refusal to comply with a UN Security Council cease-fire resolution. But several sources indicate that the slump in Iran-Japan trade may be a first sign that Tokyo is giving in to demands for sanctions.

Another piece of bad news for Iran was the ban on oil imports quietly announced by France in August. In the first six months of this year Iran had emerged as France's No. 1 oil supplier.

Iranian officials in Teheran acknowledge their country is having a hard time selling its oil. But a source close to Prime Minister Hossein Mussavi says, ``As usual, Westerners exaggerate our problems. ... they forget that in August this year our oil sales peaked at record levels. It's thus understandable that they now return to normal quotas.''

Iranian officials have always denied selling oil directly to US companies. According to US figures, the US imported 45,000 barrels of oil per day from Iran before last month's ban. But analysts say that, in addition to the direct imports, up to 200,000 barrels per day of Iranian oil was refined in the Virgin Islands and then shipped to the US.

Mr. van England covers Iran from Brussels.