Yesterday the French oil giant Total SA, announced it has suspended selling refined oil products to Iran. The decision by the company was in response to the approval last week by the US Congress to level sanctions against foreign companies that trade with Iran. This is important, according to the latest estimates from the EIA, Iran’s refining capacity is around 1.5 MMbbl/d, but its domestic consumption is closer to 1.7 MMbbl/d.
Needless to say, that is pathetic for a country that owns around 1-in-10 barrels of the world’s proven crude oil reserves.
But why invest here when you have an ideology to export?
Perhaps the lack of downstream (refining) capacity is why the country persists in developing nukes… for peaceful purposes of course (wink wink, nudge nudge)?
What’s the big deal? We are only talking about a nuke. After all, this isn’t BP (or as our esteemed, not, Congressmen insist… “British Petroleum”) we are talking about.
You know Iran has a problem when the U.S. Congress can convince the French to play ball.
This episode reminds us of Tehran’s empty boast from a few years back:
“You [i.e. the West] need us more than we need you. All of you today need the Iranian nation.”
– Davoud Danesh-Jafari, Iran’s Minister of Economic Affairs
The Guardian, Iran issues stark warning on oil price, January 16, 2006.
Ah, good stuff. Who says theocrats don’t have a lighter side? Such hubris was understandable back then. Those were heady times for the likes of the mullahs, not to mention Chavez and Co.
After all, this was post Katrina, Nymex crude oil had already traded above $70 a barrel and Wall Street’s best-and-brightest were promising us that by today we would be paying $1,872 a barrel. (Okay, that was a slight exaggeration, but not by much.)
Bottom line, in one sense Danesh-Jafari is somewhat right — the industrial world needs Iran’s oil — but the catch is, we need Iran’s oil almost as much as they need our hard currency.
After all, as pointed out in today’s issue of The Schork Report, centrifuges and North Korean know-how aren’t cheap.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.