The Lifting of the US Anti-Iranian Sanctions: What Next? The Opinion of a Shiraz Oilman

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The main intrigue of this year in the oil and gas world was the prospect of Iranian oil returning to the world market. Yesterday, Mahmoud Vaezi, head of the Iranian presidential administration, announced that Washington had agreed to lift sanctions on all economic issues. The head of the Iranian-Russian Center for Academic Cooperation, one of Iran’s largest universities, commented on what the U.S. restrictions had led to and what the first steps would be after they had been lifted.

How it all began

The sanctions against Tehran are more than 50 years old. The boycott was first announced in response to the nationalization of the Anglo-Iranian Oil Company. Although the move primarily concerned the British, the Americans supported their ally. Not without intent, of course. According to OPEC, the country has the world’s third-largest oil reserves and the second-largest natural gas reserves.

In the 1970s, the Islamic Revolution erupted in the Republic, a conflict with neighbouring Iraq broke out and the U.S. Embassy in Tehran was seized. The confrontation between the two states never ceased. And the main goal of the draconian restrictions imposed on Iran has always been oil, or more precisely, to minimize its exports.

U.S. presidents have softened, tightened, or invented new sanctions, affecting the Middle Eastern country’s ability to do business with the West. For example, Jimmy Carter’s administration stopped the purchase of Iranian oil and froze Iranian deposits in U.S. banks; Bill Clinton banned companies from developing Iranian oil and gas fields and buying oil to sell to third countries.

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In 2015, there was a truce amid the Joint Comprehensive Plan of Action (JCPOA) agreement on Iran’s nuclear program, after Tehran reaffirmed its commitment to the project. Barack Obama signed an executive order relaxing the measures imposed. For the first time in a long time, Iran strengthened its trade relations with EU countries. The inflow of foreign investment into the country in 2017 amounted to 4.4 billion euros. In 2018, however, America withdrew from the treaty and reinstated the restrictions.

Iranian Oil Minister Bijan Namdar Zanganeh said this week that since then they have lost about $100 billion in revenue due to U.S. sanctions that have prevented hydrocarbon sales. Dependence on oil revenues dropped to 10 per cent in the annual budget adopted by the government for the calendar year through March 2021, down from 42 per cent in 2012-13.

“This was a serious blow to our economy. On the other hand, the sanctions have intensified the development of most industries. We were isolated in the 1980s and 1990s, and each new round of sanctions taught us to adapt to new realities. We resorted to a policy of active import substitution. I'm talking about mechanical engineering, automobile manufacturing, pharmaceuticals, and food products. Work in the field of mining was expanded: the development of deposits of copper, tin, and coal began. Refining has also changed: we used to buy gasoline, but now we are fully self-sufficient and even sell it,” says Hamed Jafarpour, head of the Iranian-Russian Center for Academic Cooperation at Shiraz University.

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Waiting for the start

It should be noted that the supply of oil from Iran has never stopped.

“Of course, the sanctions affect the level of oil produced: in the last 5 years alone, it has fallen from 5-6 to 2 million barrels per day. There is no need to get more because we will not be able to sell it in full. Unfortunately, the situation inevitably affects the level of our technological developments. It is true that in the second half of 2020, the country found new ways to circumvent U.S. sanctions on the sale of its oil, and supplies have increased. For example, we export crude oil to China, South Korea, and Syria, and gasoline to Venezuela, Iraq, Syria, and gas to Turkey and Armenia,” Hamed Jafarpour reports.

Talks aimed at bringing the U.S. back into the JCPOA and lifting sanctions on Iran have been ongoing in Vienna since April, while the Republic will resume compliance with all its obligations under the nuclear deal. The biggest question that politicians, industrialists, and academics are asking themselves is: when will this happen, and what will the limits be?

Just the other day, Russian Vice President Alexander Novak said, “The return of Iranian oil to the world market must certainly be taken into account. Because it affects the balance of supply and demand.” Moreover, in June Novak said on the sidelines of the SPIEF that some volume of Iranian oil may return to the market already this summer in case of restart of the agreement signed six years ago.

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Yesterday, Tehran reported that negotiations had progressed far.

"An agreement has been reached regarding banks, insurance, oil and shipping, which were imposed by (ed. - former U.S. President Donald) Trump. Based on the agreement, some 1,040 sanctions will be lifted," state media quoted Mahmoud Vaezi, Iran’s presidential chief of staff, as saying.

According to Hamed Jafarpour, so far, this is only an agreement, but not the signing of an agreement. Therefore, there are no guarantees. Furthermore, the new president of the Republic, Ibrahim Raisi, will be sworn in in August, and it is difficult to predict how this will affect the process of returning to the deal.

Anyway, according to NIOC head Farokh Alikhani, the country is ready to restore most of its oil production within a month if the sanctions are lifted. And Oil Minister Bijan Zanganeh said that very shortly they will be able to bring the figures to 6.5 million barrels per day.

Such plans require not only the reanimation of the entire technical chain of the industry but also the training of new personnel.

"The profession of mining engineer has always been very prestigious and highly paid in Iran. However, in the last ten years, amid a decline in overall oil revenues, young people no longer see mining as an attractive field to build a career. They began to enroll more often in law and economics colleges and to study IT technologies. But the situation may change rapidly," Jafarpour believes.

Why Iranians should study in Russia

The expert was born in the city of Shiraz. His father was a specialist in the development of oil fields, telling his son much and interestingly about where and how oil and gas lie, how they are extracted and refined.

“I completed my undergraduate and graduate degrees in petroleum engineering at Omidia University. In my last year, a professor at the university, a very famous scientist in Iran, suggested I consider continuing my studies in Russia. He cooperated with Russian scientists, came several times for internships, and was convinced that this is where the most advanced technology is concentrated, which allows Russia to produce about 10.5 million barrels of oil every day. After detailed monitoring of Russian mineral universities I chose St. Petersburg Mining University and enrolled in postgraduate studies,” Hamed Jafarpour recalls.

In total Hamed spent 6 years in Russia. According to him the most important difference between the Russian education system and the Iranian one is the urgent consolidation of the material in practice.

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“That is, at Mining University, after a lecture students go straight to the laboratories where they reproduce the processes they have just studied with their hands, and at the end of each year, they are sent to enterprises and fields, where they intern for at least one month. We have far fewer practical classes, and the main emphasis is on theory - mathematics, physics, chemistry, geology. It is only in graduate school that laboratory research becomes an obligatory element of training. I see the Russian approach to learning as much more effective - to study and repeat yourself. This allows students to get a feel for what it means to be an oilman and, if they wish, adjust the direction of their studies,” Hamed Jafarpour stresses.

Current studies in Iran

When the young professional returned to his home country in 2019, he decided to dedicate his career to passing on the knowledge and experience he had gained to Iranian students.

“A lot of research in the oil and gas industry today is about enhanced oil recovery. Many oil and gas fields in the Republic have been developed for more than 40 years, are gradually depleting, and require rehabilitation. In this context, the topic of my dissertation is particularly relevant - the technology of oil production with the use of acid treatment of carbonate reservoirs. With the lapse of time, the efficiency of any field starts decreasing and it is the ways of preventing and removing mineral deposits in the well equipment which allow to prolong its operating life and intensify the oil flow. In Iran, I could only study the theoretical basis of production using acid composition, and at Mining University thanks to equipment, necessary reagents, and experience of scientific staff I started to conduct research, get significant results, write and publish scientific articles in international journals. Moreover, I participated and won prizes at conferences in Russia and Paris.

Today, the scientist works at the Department of Petroleum Engineering at Shiraz University, where in addition to teaching students and continuing his research he headed the Iran-Russian Center for Academic Cooperation in 2021. He aims to intensify scientific and educational cooperation between the two countries' universities.

“Even though there are good relations between the states and major joint projects are being implemented, especially in the field of energy, transportation, and industrial cooperation, we know very little about each other. The only news that you can read about Russia comes out of English-language news sites. And there is a lot of politics and propaganda. You will be surprised, but often Iranians are afraid to come to you. So I have to explain to applicants and students what Russian universities can give them and what life in Russia is like. Today, with the active development of trade, economic and political cooperation between our countries, my knowledge of Russian is a huge advantage. It is very difficult to get a job at Shiraz University, but when the rector found out that I graduated from St. Petersburg Mining University and know Russian, they practically started persuading me to get a job there,” Hamed Jafarpour notes.

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One of the leading universities in the Persian Gulf is of the greatest interest to St. Petersburg Mining University. Iranian students have repeatedly participated and won prizes at conferences organized by it, teachers from Russia’s oldest technical higher education institution have prepared joint scientific articles. To date, a draft agreement between the universities is under discussion. It includes training students in Russia, bilateral faculty internships, joint research projects, and online Russian language courses for university applicants. We can expect that since the next academic year the agreement will come into force and its implementation will begin.