Sanctions have already reduced Iran’s exports to around 1 million barrels per day (bpd) compared to 2.2 million bpd in 2011. China, India, Japan, South Korea and Turkey now count as Tehran’s main buyers.
The U.S. government has focused on blocking Iran’s oil exports because it estimates that crude sales provide about half of Iranian government revenues and that oil and oil products make up nearly 80 percent of the country’s total exports.
The rial plunged by about a third against the U.S. dollar in the week to October 2, reflecting a slide in oil income wrought by tightened sanctions over summer aimed at pressuring Tehran to drop its nuclear program.
How long the economy could function without selling any oil is unclear, but Iran has large currency reserves accumulated over decades as one of the world’s largest oil suppliers.
“What else can they export to generate the necessary revenues?” Carsten Fritsch of Commerzbank said in the Reuters Global Oil Forum.
Because of the slide in the rial and oil export earnings, the government is already moving onto an austerity footing, cutting imports of non-essential goods and urging its citizens to buy fewer foreign products.
Iran has in the past said it could shut the vital shipping lane of Hormuz at the head of the Middle East Gulf. However, a large Western naval force sent to keep open the route, through which about a third of the world’s seaborne oil exports pass might be a large obstacle to such an attempt.