Senior Advisor for Energy
Foundation for Defense of Democracies
Washington, May 11, 2020
The Trump administration’s maximum pressure campaign is having a significant impact on Iran’s macroeconomic stability and draining the government’s export earnings and reserves. As Iranian oil exports plunge, Iran’s regional and non-oil trade remains an important sanctions target. Iran is the world’s third-largest producer of natural gas, and it holds the world’s second-largest gas reserves. Iran relies heavily on its domestic natural gas production. Indeed, natural gas comprises close to 70 per cent of its domestic energy consumption. By comparison, natural gas comprises 31 per cent of the energy consumption in the United States, 24 per cent in Germany, and 15 per cent in Norway.
According to the budget submitted to the Iranian Majles at the end of 2019, the regime anticipated earning $4 billion in revenue from natural gas export sales this year, amounting to roughly 3.5 per cent of Iran’s budget. Iran exports natural gas to Turkey, Iraq, and Armenia. While U.S. sanctions do not explicitly target Iranian natural gas exported by pipeline, U.S. sanctions are applicable to financial transactions that facilitate such sales, and payments for Iranian natural gas must be held in escrow accounts in the importing country and not made to Iran. The Trump administration has requested that each buyer demonstrate that it is reducing imports over time.
The administration can target Iranian natural gas exports, since Turkey, Iraq, and Armenia have alternatives for new sources of gas or substitute fuels.
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