The U.S. administration announced this week that waivers granted to China, India, Japan, South Korea and Turkey to import Iranian oil despite U.S. sanctions will not be extended beyond 2 May. Despite strong criticism from China, India and Turkey, the countries are likely to comply with the sanctions, at least partly: China as long as trade negotiations with the U.S. continue, and India will not risk a diplomatic breakdown with the U.S. As a result, Iranian oil exports are expected to fall from an estimated 1.9mn bbl/day (one third of which has been “secret”) to the range of 0.4-0.6 bbl/day – not to zero as some trade in local currency and barter trade will continue. Real GDP is now forecast to contract by around -5% in fiscal year 2019. Meanwhile, the oil price has hit a 2019 high of 74.5 USD/bbl, suggesting that markets doubt that Saudi Arabia and the UAE will fully compensate for the loss of Iranian exports as the U.S. has indicated.
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Weekly Export Risk Outlook 24 April 2019