The ongoing Western-led embargo on Iranian oil has been in place since the early 1980s. There have been many reasons behind this series of boycotts and embargos on the most important economic resource for Iran. Experience shows that the early attempts at boycotting Iran's oil did not lead to the desired results, as Iran was able to circumvent them. By contrast, the boycott over the Iranian nuclear program has been the stringiest, eventually shaking the foundations of the Iranian economy, and creating huge obstacles for Iran in meeting its obligations in providing the basic needs of its people and its expansionist policies in the Middle East. Observers attribute the victory of former President Mohammad Khatami to the Iranian people's aspirations for democracy, while the victory of President Hassan Rohani is attributed to the interior economic crisis caused by the embargo, and the people's restlessness over the poor administration of the country and their aspiration for prosperity and peace without foreign adventures and expensive armament programs. The observers liken the current policy of economic pressure to the similar policy pursued by U.S. President Ronald Reagan in the 1980s against the former Soviet Union, when Moscow spent billions of dollars on armament programs, and provided all kinds of assistance to its allies in the socialist camp. Back then, this hurt the standard of living of many Russians, and placed heavy burdens on the budget leading up to the breakup of the USSR. However, the main question here is this: Is the tightening of the oil embargo meant to just obtain concessions over the nuclear issue, or does it go beyond this? If so, what is the agenda for the future that will require concessions and compromises by both sides? President Rohani has identified three priorities at the start of his term, namely, the hydrocarbon sector, foreign policy, and the economy at home. Rohani instructed his adviser for Supervision and Strategic Affairs and the head of the Management and Planning Organization, Mohammad Bagher Nobakht, and Finance Minister Ali Tayebnia, to conduct a prompt and thorough study to gain accurate and factual knowledge of the current state of the Iranian economy. The study found that the government of former President Mahmoud Ahmadinejad, contrary to its claims, not only failed to achieve any economic growth in 2010, 2011, and 2011-2012, but that the economy contracted between those two years by about 5.4 percent, with inflation hitting 45 percent, and not 37 percent as claimed by Ahmadinejad's government. The study also found that previous administrations created 140,000 new jobs in 8 years, and not 7 million as had been claimed. The new Oil Minister Bijan Zanganeh, contrarily to what his predecessor had announced, said that the oil productive capacity had declined in the past eight months rather than increase. Zanganeh pledged to restore this capacity to its 2005 levels, or about 4.2 million barrels per day. Zanganeh also pledged to restore oil export contracts that Iran has lost because of the embargo, albeit this will not be easy, since the traditional customers of Iranian oil have switched to other exporting countries. The experience of recent years shows that oil embargos not only lead to depriving a producing country oil revenues worth billions of dollars annually, but more seriously, they also hurt oil productive capacity. The reason is that the ability to cooperate with oil companies or technical service providers is hindered, and as a result, productive fields are neglected and no new fields are developed. The U.S. policy of embargo and boycotts of Iranian oil began with the occupation of the U.S. embassy in Tehran in 1979. Then an embargo was imposed following the attack on the U.S. Marines base in Beirut in 1984, when Iran was added to the list of countries that support terrorism. The embargos included freezing all Iranian assets abroad, a moratorium on U.S. economic assistance to Iran, and banning Iran from importing items that have dual civilian and military use. The United States stepped up the sanctions on Iran in 1992, and decided to punish any person or company helping Tehran develop weapons programs. In 1995, President Bill Clinton put a blanket ban on trade and investment in Iran. In 2013, President Barack Obama slapped further sanctions on two important industrial sectors: automotive and petrochemicals. In 1996, sanctions against nuclear materials began. The pertinent law included sanctions against non-U.S. companies that invest in the Iranian energy sector. But European and Asian companies defied the sanctions, on the grounds that they are subject only to their countries' laws and not those of the United States. This enabled Iran to circumvent these sanctions. However, Washington decided to tighten the sanctions and its measures as part of this law, and in 2013, decided to impose new sanctions, including blocking U.S. visas to executives in companies that violate the sanctions. However, the toughest sanctions yet to be imposed on Iran involve the round enforced by the U.S. Department of the Treasury, which placed a ban on all and any financial transactions with Iranian companies. The Treasury Department banned all Iranian banks from dealing with U.S. banks. In 2011, Obama banned international oil companies from dealing with the Iranian central bank, which is responsible for collecting money from companies in return for oil purchases. Some countries subsequently decided to stop importing Iranian oil, including South Korea, India, Turkey, China, South Africa, and most European countries. The shortage was offset by increased output from Gulf oil producing countries and the U.S. The last round of oil and financial sanctions was a deadly blow to the Iranian economy. Indeed, Iran lost the majority of its oil customers. It also became very difficult to charter tankers to load Iranian oil, disrupting oil shipping, but more importantly, importing countries could no longer buy oil using U.S. dollars, which meant that negotiations had to be held to find alternative and payments were delayed. In the end, Iran, reluctantly, was forced to accept Indian rupee in return for its oil. In 2011 and 2012, European oil companies withdrew from projects for developing Iranian oil fields, delaying those projects and leading to the cancellation of others, and reducing the potential increase in the productive capacity – although Asian companies (China, India, Malaysia) were contracted later instead of European companies. The boycott also reduced Iran's ability to import petroleum products. The value of Iranian oil revenues declined in 2012 to their lowest level in three years, while exports shrank to the lowest level in 26 years. According to the data of the U.S. Energy Information Administration, the volume of Iranian exports dropped to 1.5 million barrels per day in 2012 compared to about 2.5 million barrels per day in 2011. Tehran was able to limit its financial losses thanks to the rise in prices (over $ 100 per barrel). The total oil income in 2012 was about $ 69 billion, which is less than the oil revenues for the years 2010 and 2011. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
