The oil crisis has reached Iran: the export of tankers from the island of Kharg has been stopped

About a week ago, the US hit Iranian oil tankers in the port of Abbas in southern Iran. Without oil exports, the Revolutionary Guards will have difficulty paying salaries, and defecting from them could be a regime danger for Iran.

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According to satellite images commissioned at Bloomberg’s request, there were no oil tankers at all around Kharg Island on May 8, 9 and 11.

Dr. Guy Laron, a senior lecturer in the Hebrew University of Jerusalem and the author of the book “Oil Wars”, says that “this means that the American naval blockade is working, because this is exactly what we expect to see in such a case.”

Ella Rosenberg, an expert researcher on the Iranian economy and terrorist financing at the Jerusalem Center for Foreign and Security Affairs, is more reserved and says that “the American blockade only half worked.” And yet, the result is the same: “A few days ago there was a Kharg oil leak, either because of the old equipment that the Revolutionary Guards work with, or a deliberate attack. On the other hand, it can be seen from the visible sources that there is only one tanker in the vicinity. This is nothing. This means that it is impossible to export oil, which means that the Revolutionary Guards will have difficulty financing themselves.”

Exporting oil is not a simple act of opening and closing a faucet, and the interruption of current exports has a long-term effect. Razenberg explains that docking of tankers is a complex operation that sometimes takes up to 72 hours, which means that even if exports resume tomorrow, the arrival of tankers in the region and their docking will continue to deprive Iran of exports. The oil spill will also make docking and operation difficult.

Dr. Laron adds that “as soon as we run out of storage space, we must slow down or stop production altogether. But the operation of pumping oil is complex pressure management, and if it is stopped – it is not certain that it will be possible to renew it. And certainly not immediately. It can take many weeks to resume production.”

The American goal, according to Dr. Laron, is to dry up the Iranian economy of dollars. If there is no oil to export, there will be no dollars, nor will there be yuan from China and “this is expected to have a rather dramatic effect on the Iranian economy. Many civil servants report, according to the opposition-affiliated news agency Iran International, that they have not received the salary increases the government promised to overcome the extreme inflation Iran is currently suffering from. The price of the Iranian Rial now stands at 1.8 million to the dollar, compared to 1.6 million just a month ago.”

The alternative economy

However, Rosenberg explains, the Revolutionary Guards have other ways to finance themselves: “The Revolutionary Guards deal in human trafficking. They kidnap boys aged 15-18 from Afghanistan and Pakistan, and send them as ‘soldiers’ to whoever is willing to pay for them – in the past they came to Syria, today they come to Russia to fight on the frontline against Ukraine.

They also mine crypto with the help of subsidized electricity, and are engaged in foreign exchange management, but with the current sanctions it is more difficult.”

However, she emphasizes – all these ways are dwarfed compared to Iran’s normal oil profits, which last March were estimated at approximately 139 million dollars each day. In the first phase of the war, Iran’s oil profits even rose in light of the blockade of its competitors and the temporary lifting of sanctions on Iranian oil. But close to the ceasefire, the US imposed the naval blockade on Iran, the results of which are now beginning to manifest.

will undermine the regime

Direct damage to the Revolutionary Guards may have dramatic consequences. According to Dr. Laron, “This is the way to undermine the regime in Iran.” He says that an Iranian exile, formerly of the Revolutionary Guards, testified that many do not treat their service there as an ideological mission but as a place of work, which means that stopping payments could lead to defections.

Ella Rosenberg reinforces this point, and characterizes it as the main weak point of the regime: “What led to the protests in December was the inability to obtain basic infrastructure such as water and electricity. But we need to focus on the MLAs themselves and cause defections. If I were on the other side this is what I would fear. Because as soon as you leave the military, the story is over.”

How will stopping oil exports affect the negotiations between the US and Iran?
“It may certainly have an effect. The goal of economic sanctions is to bring the Iranian regime to a weaker point in the negotiations with the US. It may certainly cause them to be weaker and more willing to compromise. Unlike other measures they have taken so far, it may work,” says Rosenberg.

But Dr. Leron is more reserved: “Not immediately. It may take months. The situation in Iran will have to be catastrophic for the regime to surrender and give up the enriched uranium.”

Still, the short term is also significant: “From Israel’s point of view, every day that the blockade continues constitutes long-term damage to Iran’s ability to return and threaten the region. It could take an entire decade for the Iranian economy to recover from what happened to it.”