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How Iran is sharing lessons in resilience with Venezuela

Workers of the Venezuelan state oil company PDVSA wave Iranian flags as the Iranian-flagged oil tanker Forest docks at the second-largest refinery, Cardon, in western Venezuela, May 27, 2020.

An Iranian supertanker that shipped the country’s first oil cargo to Venezuela last week despite US threats to stop it is loading the Latin American country’s crude for export, media reports say.

Venezuela’s oil industry is hobbled by US sanctions which have thrown the country - owner of the world’s largest oil reserves - into its worst economic crisis in years.   

And with most shipowners and oil traders shunning business with Venezuela for fear of the sanctions, Iran has emerged as the only country helping Caracas bring its refineries back to service and cope with an acute fuel shortage.

Oil refineries in Venezuela have capacity to process some 1.3 million barrels per day (bpd) of crude, but they are producing little fuel due to years of underinvestment amid US sanctions.

According to Bloomberg, the Iran-flagged supertanker Honey is loading Venezuela’s top exported grade Merey 16 at Puerto Jose after discharging 2 million barrels of Iranian condensate.

The cargo on board of the Iranian ship is expected to be sold in Asia, the main destination of Venezuelan crude, the financial news provider said.

Reuters news agency said three Iranian tankers - the Fortune, Faxon and Forest - are also crossing the Atlantic Ocean on their way to Venezuela, carrying gasoline to help ease an acute scarcity that has kept Venezuelans lining up in front of gas stations waiting for fuel.

The same vessels and two additional Iranian tankers delivered 1.5 million barrels of gasoline and diesel fuel to Venezuela between May and June despite US threats to stop them, while the South American nation shipped a cargo vessel carrying alumina to Iran's Bandar Abbas port.

Washington has sought to disrupt the deepening bilateral trade between the two countries.

Last month, the US government went on a full-throttle propaganda campaign, claiming that it had seized 1.116 million barrels of Iranian fuel because it was bound for Venezuela.

Iran, however, put down its foot to assert that neither the ships were Iranian nor their owners or their cargo had any connection to the Islamic Republic.   

A legal challenge put up by the owners of the cargoes in the US early this month showed Iran was right.

United Arab Emirates-based Mobin International Limited said it was the owner of the cargo aboard the Bella and Bering tankers, UK-registered Oman Fuel said it owned the cargo aboard the Pandi and Luna tankers, and Oman-registered Sohar Fuel said it part-owned the cargo aboard the Luna. 

The arrival of the Iranian-flagged very large crude carrier (VLCC) carrying Iran’s condensate to be used as diluent for Venezuela's extra heavy oil production further wrong-footed the US on its claim that it had found a way to stop the shipments.

In June, Iran also sent a cargo of food to Venezuela to supply the South American nation’s first Iranian supermarket.

Covering an area of 20,000 square meters, the store is selling more than 2,500 Iranian items including foodstuff, clothing, detergents, plastic, disposable products, nuts, and even tractors.

The store ushered in a new era of cooperation between Caracas and Tehran, hailed by political observers as a step in breaking the paradigm of US power to subjugate sovereign countries.

Will Venezuela become more like Iran? 

Leading American magazine Foreign Policy said last week the US “maximum pressure has not destroyed the Iranian economy, and Tehran is now sharing its lessons in resilience” with the beleaguered Venezuelan government.

Since Iran came under broad economic sanctions in the mid-2000s, Iranian policymakers have repeatedly asserted that the country would respond by adopting a “resistance economy” which would aim to reduce dependency on imports and Western investment.

“The simple fact that Iran, which has faced a broad campaign of sanctions for more than a decade, has recently come to the aid of Venezuela, which has been under concerted sanctions pressure for only a few years, suggests a remarkable degree of economic resilience. When comparing the two economies, the most salient question is not whether Iran will become like Venezuela, but rather whether Venezuela will become more like Iran,” the US publication said.

Foreign Policy touched on Iran's economy in the aftermath of the US sanctions, including in the year leading up to March 2020, during which it generated $41.3 billion of export revenue from nonoil goods. Around half of this total was from manufactured goods, it noted.

In the same period, Iran’s oil exports totaled just $9 billion, marking a historic moment in its modern economic history where the country’s industrial sector, which employs around one-third of the labor force, earned double the export revenue generated by the country’s oil sector.

“Remarkably, Iran managed to grow nonoil exports during a period in which it was subject to US secondary sanctions for all but two years. One of the major consequences of sanctions pressure, the steep devaluation of the rial, actually served to make Iranian exports more competitive abroad,” it said.

The development of the Iranian private sector in the first decade of the millennium—encompassing improvements in the quality and efficiency of manufacturing as well as the capture of local market share—led to a larger number of manufacturing firms eyeing export potential, the magazine said.

From March 2019 to March 2020, China was the top destination for nonoil exports, with Iraq, the United Arab Emirates, Turkey, and Afghanistan rounding out the top five destinations, it added.

But Iranian policymakers are already indicating that their response will be to double down on a longstanding feature of Iranian economic policy under pressure: the “search for beneficial opportunities for engagement with the international economy.”

“Iran’s recent outreach to Venezuela, with the new spectacle of Iranian exports for sale on supermarket shelves in Caracas, is the latest example of this opportunistic approach to international engagement,” Foreign Policy wrote.

On Tuesday, Venezuela pledged to continue trade with Iran after the US announced new sanctions on Iranian officials entities as well as President Nicolas Maduro.

The Venezuelan foreign ministry said “no intimidating and arrogant action by the US government will prevent it from exercising its sovereign right to establish economic and commercial relations freely with the Islamic Republic of Iran and with any State.”

Venezuela and Cuba also on Monday called on the international community to put up a united front and fight the United States’ hegemony and its blockade of world nations at a time of global crises, including the coronavirus pandemic.


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