Iran may withstand US blockade for months without major economic crisis: report

TEHRAN: A US military blockade of Iranian ports is expected to deprive Tehran of crucial oil income, but Iran could endure the pressure for months without triggering a major economic crisis or causing lasting damage to its oil sector, according to an NBC News report cited on Saturday.

The assessment could weaken US expectations that the blockade would quickly force an end to the war. The blockade began about a month ago, after which US President Donald Trump and senior members of his administration indicated it would rapidly create a crisis in Iran’s oil industry.

Trump had said Iran’s oil infrastructure could fail within days if exports were halted.

If they don’t get their oil moving, their whole oil infrastructure is going to explode.

That forecast has not materialised, although the blockade has left dozens of Iranian tankers halted near the Strait of Hormuz.

Iran has gradually lowered oil production because of the blockade and may exhaust its storage capacity within two months, a development that could force some wells to be shut. Even so, Tehran may be able to avoid large-scale shutdowns because a significant share of its crude can be processed and consumed at home, allowing most oilfields to remain in operation.

Production cuts and domestic refining

Robin Mills of Qamar Energy consulting and the Centre on Global Energy Policy at Columbia University said Iran would likely have to reduce output substantially, but domestic refining capacity would allow continued production.

They’re going to have to shut down about half of their production. They can keep producing because they can refine it domestically.

Gregory Brew of the Eurasia Group said Iran had prior experience in scaling back oil production, having done so twice over the past 15 years under US sanctions.

I don’t think it’s going to do tremendous damage to their infrastructure.

They know how to do this. They’ve done it before.

Brew said Iran has responded by reducing the volume of oil loaded onto tankers from around 11 million barrels a week to about 6 million to 8 million barrels weekly.

The blockade has cut off access to a major source of revenue for Iran, but available assessments cited by NBC News suggest the country’s oil system is not facing the immediate collapse that some US officials had predicted when the restrictions were imposed.

The developments come amid continued tensions linked to the conflict between the United States and Iran, with the Strait of Hormuz remaining central to the pressure campaign because of its role in Iran’s oil exports.