Iranian Oil Minister Concedes Sanctions Have Hurt Exports

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Iran's oil minister acknowledged for the first time on Monday that petroleum exports and sales had fallen by at least 40 percent over the past year, contradicting his previous denials and providing an unusual public admission that the cumulative impact of Western economic sanctions has grown more severe.

The acknowledgment by the oil minister, Rostam Qasemi, came as new restrictions from the sanctions are threatening to further choke Iran's ability to sell oil, its most important export. Under provisions of an American law that take effect in February, importers of Iranian oil that have been exempted from the sanctions cannot send the money used to buy it to Iran without risking penalties in the United States. The result could impound billions of dollars' worth of Iran's expected oil revenue in the banks of those importing countries.

Additional punitive measures, which President Obama signed into law last week, broaden the roster of blacklisted Iranian industries to include all energy, shipping and shipbuilding enterprises and seek to restrict barter transactions that Iran has been using to circumvent earlier sanctions. Some critics of the new steps say they nearly amount to a trade embargo.

In another consequence of the sanctions' impact, the Oil Ministry on Monday stopped the sale of jet fuel to Iran's heavily indebted domestic airlines unless they pay cash. The semiofficial Mehr news agency reported that most commercial airline flights inside the country had been canceled as a result.

Mr. Qasemi, a former Revolutionary Guards commander who was appointed oil minister more than a year ago, had consistently asserted that Iran had no problem selling its oil. In September, in an address to the Parliament, he said that oil exports were rising, despite outside data that showed a sharp drop. At other times, he has threatened to halt all oil exports in retaliation for the sanctions, apparently in a vain effort to raise oil prices by frightening global oil traders.

Both the Organization of the Petroleum Exporting Countries, of which Iran is a major member, and the International Energy Agency, a group of mostly Western oil-importing countries, have reported that Iran's crude exports fell to roughly a million barrels a day by the end of 2012, compared with 2.4 million a year earlier.

Other Iranian officials have said it is clear that the country's oil exports have suffered.

Economists knowledgeable about Iran's sanctions problems said Mr. Qasemi's acknowledgment of the export decline, made at a parliamentary meeting on finances, was inevitable because the government must find a way to fill a large gap in the budget -- a gap that revenue from oil exports had been expected to fill.

The Iranian Students' News Agency quoted the minister as telling lawmakers that "there has been a 40 percent decrease in oil sales and a 45 percent decrease in repatriating oil money." The agency also quoted him as forecasting further decreases without specifying how much.

"It's common knowledge in Iran that oil exports have fallen," said Djavad Salehi-Isfahani, an economics professor at Virginia Tech, who visited his native Iran last month. "I don't know if the oil minister had been in denial."

Dr. Salehi-Isfahani suggested that President Mahmoud Ahmadinejad's government might have to resolve the budget deficit problem with an accounting maneuver that would recalculate the value of Iran's oil sales at half the official foreign-exchange rate -- 25,000 rials per dollar instead of the central bank's artificial rate of 12,260 rials per dollar.

That change would be much closer to the rial's actual value and essentially double the amount -- in rials -- gained from Iranian oil exports. But such a move would also concede the sanctions' severe inflationary impact, which has caused a steep fall in the value of the Iranian currency this past year.

Many Iranians have suffered from the rial's decline, which has essentially made them poorer by raising the price of imported goods. Iran's inflation also has left many Iranian businesses unable to pay wages or bills. The problem surfaced in a new way on Monday with the abrupt cancellation of domestic flights by Iranian airlines, which had been buying fuel on credit.

The head of the Airlines Association, Seyyed Abdol Reza Musavi, told Mehr that flights in Tehran, Kish, Mashhad and other airports had been halted because the carriers failed to repay their debts, and that fuel would now be provided "on a cash-only basis." It was unclear how long the flight suspensions would last.

The sanctions on Iran have been intensifying for the past few years because of its disputed nuclear program, which Iran says is for peaceful use but which Western countries and Israel suspect is meant to develop the ability to make nuclear weapons.

Thomas Erdbrink contributed reporting from Tehran.

world

This article originally appeared in The New York Times.


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