Iran holds the second largest gas reserves in the world, but we face a deficit of about 320-350 million cubic meters in winter. Most of the gas is located in a single province, Bushehr, off the coast the Persian Gulf. If our refineries are targeted, it could lead to a domino effect, impacting the petrochemical industry, electricity generation, industry and households. It would also lead to significant problems for countries like Iraq and Turkey, which import large amounts of Iranian gas.
Are oil exports being squeezed more by western sanctions in recent weeks?
Oil exports have been impacted, but not by sanctions. It’s mainly due to concerns about Kharg Island in the northern part of the Gulf, being targeted, from where 95% of Iran’s oil is exported. There are only two countries that can truly sanction Iran’s oil right now; China, which imports over 95% of it, and the UAE, where most of the financial transactions for oil are facilitated as part of the Iran-GCC rapprochement. The US could choose to disrupt tankers to China, but that’s unlikely as the Biden administration wants to ensure more oil flows into the market.
Where does Iran’s nuclear program sit today?
Iran’s nuclear program is part of its geopolitical strategy. On the ground, I don’t think we’re going to see a bomb constructed anytime soon. However, politicians are increasingly discussing the need to create regional balance by developing a bomb. Military officials and political figures are now openly talking about it. There’s also talk about using the Strait of Hormuz as geopolitical leverage. While physically closing the Strait is impossible, disrupting the flow of traffic through it is entirely feasible. Even partial disruptions, like targeting a few tankers or creating blockades, would create chaos in the market and significantly increase the risk premium on energy prices. This is an option on the table.