Royal Dutch Shell Plc  .com Rotating Header Image

Sanctions Fail to Cripple Iran’s Oil Industry

The Wall Street Journal Home Page

Sanctions Fail to Cripple Iran’s Oil Industry

U.S. Tries Squeeze 
But Fears Tehran 
Is Buying Time
July 18, 2008

As Iran prepares to hold nuclear talks this weekend with Europe and the U.S., economic sanctions are crimping Tehran’s oil industry — but they haven’t broken it.


Sanctions have been a key part in Washington’s strategy to force Tehran to the bargaining table. U.S. Treasury officials have said they think the strategy is working, and Iran’s foreign minister appeared to soften his stance this month.

While Iran had insisted it would never give up its nuclear program — which it says is for peaceful purposes — the minister hinted his country might consider a freeze on its nuclear activities.

It is unclear whether Iran is really changing tack or buying time. And the U.S. has softened its position too: The Bush administration, which has rejected direct talks with Iran, said this week it will send a top diplomat to talks this weekend in Geneva between Iranian and European officials.

The U.S. is also weighing whether to open a diplomatic interest section in Tehran — in effect, a substitute for an embassy that could assist with visas, passports and emergencies involving U.S. citizens. White House spokeswoman Dana Perino said Thursday a decision on the idea isn’t imminent.

A recent U.S. congressional research report called the Iranian oil and gas sector’s vulnerability to sanctions “debatable.” Iranian officials say they have been coping. Surging oil prices have helped. The U.S. Energy Information Administration estimates Iran brought in some $54 billion in oil-export revenue in the first six months of this year. That compares with an estimated $57 billion for all of 2007.

Sanctions have caused considerable pain, and rising costs are an issue.

National Iranian Oil Co. plans to spend about $16 billion investing in oil and natural-gas projects this year, according to Akbar Torkan, Iran’s deputy oil minister for planning. (The Iranian calendar begins in March.) That’s up from an average of about $12 billion each year for the past three years, he said. “We are using our domestic capacity instead of foreign funds, which today are not so available for us,” Mr. Torkan said.

The sanctions on Iran include measures imposed by the United Nations two years ago and toughened last year, as well as unilateral steps by the U.S. The effect of the sanctions is to limit Iran’s access to international capital markets and block it from acquiring advanced American and European technology.

The measures have caused considerable pain for Iranian businesses. In the oil patch, sanctions have made it harder for private contractors to finance big projects and find suppliers, sending oil-field costs higher. Najaf Pezeshkian, an adviser at the Iranian Offshore Engineering & Construction Co., an oil-services firm in Tehran, estimates that sanctions have increased the company’s costs by as much as 30%.

The sanctions effectively ban American companies from doing business in Iran. European oil giants BP PLC, Royal Dutch Shell PLC and Total SA have said political considerations rule out new plans to invest in Iran’s petroleum sector for the time being. Shell and Total say they remain in talks about getting involved in projects.

Write to Chip Cummins at [email protected] and Roshanak Taghavi at[email protected]

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comment Rules

  • Please show respect to the opinions of others no matter how seemingly far-fetched.
  • Abusive, foul language, and/or divisive comments may be deleted without notice.
  • Each blog member is allowed limited comments, as displayed above the comment box.
  • Comments must be limited to the number of words displayed above the comment box.
  • Please limit one comment after any comment posted per post.