Iran Lost 15% Of Funds Released By South Korea
Iran's ambassador in Seoul revealed on Monday that the conversion of its funds, released by South Korea earlier this year, resulted in a 15% loss.
Iran's ambassador in Seoul revealed on Monday that the conversion of its funds, released by South Korea earlier this year, resulted in a 15% loss.
Ambassador Saeed Koozechi told local media that Iran’s financial loss “should be somehow compensated for.” He clarified his remark by adding, "We can compensate for these damages by strengthening and expanding the existing cooperation and capacities between Iran and South Korea."
South Korea had frozen between $6-7 billion of Iran’s revenues from oil sales that occurred before the United States imposed full sanctions on Tehran in May 2019. After four years of Iranian demands to free the funds, the United States agreed in August to allow South Korea to unblock the funds in exchange for the release of five US citizens held hostage by Tehran.
However, the money had already been converted into Korean currency, won, and when it was converted back to euros, Iran sustained losses. In the four years since the money had been frozen, won lost more than 10 percent of its value against the US dollar and the euro. The final amount that reached Qatar, the current custodian of the funds, it totaled 5.73 billion euros.
The US-Iran agreement to free the hostages in exchange for the funds led to criticism of the Biden administration, as many called the scheme the largest ransom payment in history.
This plan involves not only exporting oil but also repairing Venezuelan refineries to facilitate this export. The goal is to restore Iran's oil exports to pre-sanctions levels, reaching 2.5 million barrels per day, amid US sanctions.
This is noteworthy given previous efforts by Iranian companies to repair Venezuelan refineries in 2020, particularly the 'Cardon' refinery, which experienced a fire shortly after repairs, and the unsuccessful overhaul of the El Palito refinery.
Iran renewed a €100 million contract for the repair of the El Palito refinery with Venezuela last year, and the facility, operating at 20% capacity, began operations in June 2023. Previously, this refinery had a daily capacity of 140,000 barrels, and it is unclear what its current capacity is.
Iranian customs statistics suggest that the equipment needed for this refinery has not been exported from Iran to Venezuela. It is likely that the Islamic Republic has purchased second-hand equipment from other countries to repair this refinery.
In recent years, Iran's non-oil exports to Venezuela have remained around $20 million annually, equivalent to less than 0.1% of Iran's total non-oil exports.
Amid serious economic isolation, the Iranian regime clings to any small and insignificant international economic deal to show audiences at home that the government is successful in fighting sanctions and instill hope that the economic crisis can be overcome. Minor deals with developing countries in Asia and Africa are trumpeted as major successes.
Iran also signed a gas condensate barter deal with Venezuelan heavy oil, starting in the fall of 2021. Data from the Commodity Intelligence Company, Kepler, indicates that Iran delivered 28 million barrels of gas condensate to Venezuela until January 2023 and bought extra-heavy crude oil from the country for resale to China.
However, since February this year, with the reduction of US oil sanctions against Venezuela, the country has not received any shipments of gas condensate from Iran. This indicates that as soon as Caracas was offered a reprieve from sanctions, it began procurement from other sources.
Iran's ambition to repair Venezuelan refineries and export crude oil to the country is significant considering its own domestic refinery challenges. Iranian refineries have experienced a 10% decline in the past decade due to insufficient maintenance and upgrades, leading to the conversion of 30% of received crude oil into mazut and bitumen, compared to just 4% in modern refineries.
For instance, Iran's largest crude oil refinery, Abadan, converts 47% of the crude oil it receives into mazut and bitumen. The operation of this refinery is, in principle, not economically viable.
Iran had agreements with South Korean and Chinese companies in the mid-2010s aimed at reducing mazut and bitumen production from refineries to 10%. However, these deals were canceled following the US withdrawal in 2018 from the Obama-era JCPOA nuclear deal, and Iran has faced challenges in modernizing and repairing its domestic power plants.
Iran’s oil exports fell from 2.2 million barrels per day in 2017, to less than 300,000 in 2019, after full US sanctions came into force. However, recently Tehran has succeeded to boost exports close to 1.8 million barrels per day, as the Biden administration has failed to enforce the sanctions. China is the main customer of Iran’s illicitly shipped crude.
Venezuela, once possessing a refining capacity of 1.3 million barrels, has seen its capacity diminish to less than 190,000 barrels per day due to refinery aging and inactivity, exacerbated by US sanctions over the past decade.
In recent months, Owji has consistently reported oil production growth figures that contradict estimates from international entities.
Both OPEC and the International Energy Agency, put the country’s crude oil production at 3.1 mb/d in September, when Owji had claimed 3.3 mb/d output level for that month.
A possible reason for Owji’s exaggerated claims is repeated promises by President Ebrahim Raisi’s administration to boost the energy industry, while e its overall economic performance has remained dismal. Annual inflation hovers around 50 percent, while the government is in a race to print more money. The national currency, rial, is near its historic lows at 520,000 per US dollar.
Iran used to produce about 3.8 mb/d of crude oil as well as 650,000 b/d of gas condensate (ultralight oil) before the US imposed sanctions in 2018, when it withdrew from the Obama-era JCPOA nuclear accord and opted to put ‘maximum pressure’ on Tehran.
From the higher pre-sanction volumes, roughly 2.5 mb/d was exported and about 1.95 mb/d was consumed domestically. Currently its domestic consumption stands at 2.2 mb/d due to operational of new phases of Persian Gulf Star refinery, which refines gas condensate.
How much oil Iran produces?
According to Kpler trade intelligence firm’s tanker tracking data, Iran’s crude oil and gas condensate exports reached 1.812 mb/d together in October, the highest since 2019 and about 370,000 b/d more than in September 2023. However, a part of this growth is due to selling its floating oil storage, not production growth.
Iran’s crude oil floating storage has declined 10 million barrels during October, or 322,000 b/d. Iran exported 1.5 mb/d of its surplus oil production as well as 322,000 b/d of flouting stockpile.
Iran had about 60 million barrels of unsold floating crude oil, stored on tankers as well 50 million barrels of gas condensate in mid-2022, but they had declined to 26 million barrels and 1 million barrels respectively as of late October 2023.
According to Oil Ministry’s official data, obtained by Iran International, the country’s 10 refineries currently consume about 1.75 mb/d of crude oil and 450,000 barrels of gas condensate (2.2 mb/d together).
As the country produces 650,000 barrels of gas condensate daily; It has 200,000 b/d of surplus to export.
If Owji’s claims are true and Iran is producing 3.4 mb/d of crude oil, then it should export its surplus 1.65 mb/d of crude oil as well as 0.2 mb/d of gas condensate.
However, as it was mentioned above, the country exported 1.812 mb/d of oil in October, including about 322,000 barrels of floating crude oil sale.
Therefore, Iran had only 1.5 mb/d of surplus crude oil and gas condensate for export in October.
It means crude oil production was about 3.1 mb/d, in line with OPEC and IEA’s estimates, not 3.4 mb/d, claimed by Owji.
Iran has still 26 million barrels of floating crude oil storage to be sold, according to Kpler.
