The Blockade is Costing Iran $400 Million a Day in Lost Oil Revenue

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The blockade of Iranian ports has led to a 90% drop in Iranian oil exports. Estimates are that the blockade is costing Iran $400 million a day in lost oil revenue. And Iran is no longer able to receive shipments of food and medicines from its traditional suppliers abroad, who are now blocked from using Iranian ports. How long can the Islamic Republic survive under such conditions?

Oil constitutes some 85 percent of Iran’s exports. And now, because of the blockade, none of that oil can now be shipped abroad. Iranians are now living meagerly on whatever reserves they may have saved from former years, a sum which is asymptotically approaching zero. And that American blockade that shows no signs of ending — certainly not until the Iranian leaders agree to hand over to a third party the 144 lbs. of uranium enriched to a level of 60% that Tehran possesses. Oil continues to be produced, and is now filling all the “parked tankers” floating just offshore in the Gulf and all the storage tanks on Kharg Island. But both are now filled close to capacity, with no end to the flow of oil from the wells in sight.

The blockade of Iran’s ports has put the Islamic Republic in the worst condition it has ever been. It can’t export the oil, which is now filling up both tanker ships and storage facilities on line, and they will be totally filled by mid-May. What then? Assuming the American blockade of Iranian ports remains in force, there will be no place to put the oil, and the government will have to halt its production. But that will have serious consequences for oil production in the future. When oil is no longer being pumped, it affects the quality of the oil in the wells.

Shutting off working wells can damage them in several ways. When oil cools, it can deposit paraffin wax and sediment which can clog the rock that holds the oil. Also, when extraction stops, the natural water table below the oil zone can rise, flooding the reservoir and permanently trapping the oil. Halting production can also cause pressure imbalances and corrosion. The costs of restarting production after all this can be prohibitive.

What can Iran do? In about a month, it will have run out of storage space for its oil. It is damned if it produces oil with no place to store it, and damned if it turns off the wells, and permanently damages them. There is no good answer. Iran has until mid-May to arrive at a deal on Trump’s terms, so that the blockade is called off and Iranian oil can again be shipped at rock-bottom prices to those hard-bargainers, the Chinese.

The people of Iran, worse off economically than ever before, with their collective gorge rising, will go out on the streets again, as they did in January, to shout their deepened despair, and rage by the millions at their tormentors, and this time, with nothing to lose, could well keep on protesting until the regime collapses. The key players in the 1979 Iranian Revolution were not the students, nor the bazaaris, but the oil workers. When they went out on strike in 1978 against the Shah’s regime and in support of the little-known and less-understood Ayatollah Khomeini, Iran’s production, and sales, of oil and refined petroleum products plummeted. This led to great economic distress, which only added to the fury of ordinary Iranians, who blamed not the workers on strike, but the regime itself, against which those workers were striking. Strikes at the facility played a major role in the 1979 revolution, helping to overthrow the shah of Iran. That symbolism is not lost either on the faltering regime, or on those who are now determined to topple it.

Iran is now facing a complete economic collapse. Every day that the blockade continues costs the country $400 million. Americans have to pay more for gasoline, but what a small price that is to pay in order to prevent one of the world’s worst regimes from obtaining the world’s most dangerous weapon. As Trump puts it, when one weighs the hardship of higher prices at the pump against the possibility of a nuclear-armed Iran, there is in his view only one choice: Americans must endure what he believes is a painful but temporary price rise, in order to save the world from a nuclear Iran.