Yes the Iranian currency has lost more than 50% of its value this year as speculators have taken advantage of Iran's lack of an official currency trading house and played off of peoples fears of sanctions. No country has ever been subjected to the amount of sanctions that Iran has today placed on it. Everything from airplane parts, CT scans, transfer of money through banking, and international insurance have restricted about everything that comes into Iran.
There is not one item or service that is not somehow hindered from entering or exiting Iran. So, how is it that Iran doesn't seem like a country that has any sanctions? Unlike other nations that have in comparison minor sanctions producing underprivileged and under developed economies, in Iran you find everything from Apple computer stores to fashion brands found in any Western nation to the latest and most expensive foreign auto brands.
A past article tries to explain one reason for this difference. In that article, I talked about how Iran is an ancient nation of traders and chess players. In a way you can say it was the Persians who started these. The word bazaar comes from Iran and so too was chess an ancient Persian game played by both warriors and scientist to sharpen their minds.
Today , an article in Reuters revealed what Iran has been recently doing to get past Western sanctions. The media have been reporting for months that Iran's oil exports are down. One reason being that its tankers have been used to store its oil versus being used to transport for foreign clients that are unable to ship themselves.
Now Reuters , through its investigations, has learned that Iran has been shipping its oil to an island near Malaysia called Labuan. Here waiting tankers hired by Iran to mask the origin of the oil are parked and waiting for the Iranian tankers. These hired foreign tankers resell the crude oil under other nation's names after they are blended to mask the type of oil.
Through this method Iran's tankers were freed up to deliver oil to customers that were unable to ship the oil themselves because of the European ban on insurance (covering 90% of the shipping industry) for Iranian oil. So while the Western world was sitting satisfied that they had hurt Iran, the Persian chess players were literally selling their oil at night.
Iran has also wisely decided to not fall into the trap of selling its oil too cheaply. It has on multiple occasions chosen not to sell its oil to a customer that has requested a lower price. That is the reason why Iran has used the method of storing oil near customers versus selling at any price even though it would then free up tankers to ship to other customers. It would rather pay a daily rental price for oil tankers (above $100,000) than sell its oil cheaper.
This results in having a ship near a customer and once they need the oil Iran can get premium prices from them. Iran's competition would need to ship oil to Asia which can take weeks to months depending on where they are. This practice was made popular by Iran a few years ago when sanctions were first enacted. Other oil exporters have also taken up the practice when they know that they can sell their oil for more expensively in the future. A kind of forward futures way of oil selling.
What is interesting about all of this is the fact that is is completely legal. Yes Iran uses multiple front companies to mask how the process works and hides Iran's name but that is not illegal. What is illegal are the sanctions that the US and EU governments have placed on Iran.
Both powers use their large reach to blackmail nations from buying and selling to Iran. Europe, because it covers almost all of the world's marine insurance coverage and the US through the dollar domination of the world can prevent companies from using the American banking system which translates to no more dollars. Both of these have their own ramifications.
The head of Iran's insurance watchdog in an interview with a local news agency said that this year Iran would save around $700 million by self covering Iranian tankers. That is $700 million that European companies will no longer see as revenues and Iran is no small player in the tanker world having the 4th largest fleet.
Also, Japan and India are providing sovereign coverage of their own tankers for Iranian oil so that is 2 major nations that will not be using the services of the EU insurance companies.
The usage of the US dollar is also in retreat as more nations start to implement bilateral currency exchanges bypassing the US dollar altogether. Brazil, Russia, India, China the so-called BRIC nations have already started using their own currencies in their trades amongst themselves.
The Iranians are again playing chess with rivals that are playing checkers.
This article was first published on The Real Amir Taheri