Of javier blas*

Oil smuggling is not easy but so extremely profitable that any obstacles simply slow it down. Of course, authorities can trade in illegal barrels less efficient financially. In the end, however, smuggling continues. Russia, Iran and Venezuelathe three major oil production countries subject to western sanctions, still draw about 16 million barrels of crude and other petroleums a day. Suppose the three sell oil with a 20% discount on market prices and do the math: This is $ 1 billion worth of oil a day.

I am cautious about the ability of the latest round of sanctions and promises of more stricter implementation of older sanctions in order to stop illegal transactions. The measures will create more friction and make smuggling more difficult and probably less profitable, forcing sellers to offer greater discounts. But they will not substantially reduce the flows, let alone stop them.

The amounts involved are so huge and this business is so lucrative that all involved – Sellers, buyers and intermediaries – have a great motivation to find alternative routes, tricks and tricks to keep the black market live. Over time, the auditors get tired and smugglers become wiser.

Does not help the fact that Not everyone considers the oil of Russia, Iran and Venezuela as illegal. For China, India and many other growing countries, their barrels are just as good as any others.

In addition, countries that impose sanctions are motivated to be more relaxed with smugglers to keep the price of oil low and should convince everyone else, especially Beijing and New Delhi, that the most expensive crude is a price that It is worth paying to impose sanctions. There is a historical precedent for this, with the success of the United Nations Embargo in Argon from Iraq and Kuwait in 1990-1991. But we have learned over the last five years that the West does not have the political will to face the highest energy costs, and the world south is not interested in supporting Washington, Brussels and London. The political will for strong sanctions is so weak that even Japan, which is usually aligned with the US, only supports them in words.

The political and economic background is important to understand what is going to follow in the black oil market. Attention is focused on Russia and Iran, which draw about 15% of world oil together.

Last week, US President Donald Trump signed a decree ordering his government to restore the “maximum pressure” campaign and “reset Iran’s oil exports”. Theoretically, it was a strong energy. But Trump undermined himself by saying, with the pen in his hand, that he was “divided” for it. “Everyone wants to sign it,” he said, adding: “I sign it, but I’m unhappy to do it.” If this was not enough, he made it clear that he finally did not want to disturb the flow of oil: “I hope we will not need to use it.”

In addition, the decree was long in words and short in terms of actions. The US Treasury announced days later, in a separate announcement, that it is imposing sanctions on the “network” used by Iran to bypass US penalties for oil. The problem is that this move was targeting a single large oil tanker and two small ones. In recent years, Iran has been based on more than 500 tankers for its oil trafficking, almost 60% of which have not been sanctions.

For the time being, let’s focus on oil tankers, which continue to receive Iranian crude for exports. Indeed, some of them need more time to find a buyer and are currently storing slow on the high seas. But it’s just a matter of time – and a greater discount than market prices – before someone buys this oil. In addition, Iranian oil production, when calculated in its entirety, flirts with the highest level of more than 40 years. Tehran produces not only slow – the main focus of sanctions – but also other oil products, which bypass the sanctions even more easily. Iran pumped around 4.5 million barrels a day last year, the third highest volume since 1978.

Russia was found under sanctions immediately after the invasion of Ukraine, but Western politicians focus on maintaining oil prices at low levels rather than limiting flows. In the last days of his term, former US President Joe Biden has changed a little bit of a bit, imposing the stricter sanctions that have been made in Moscow to date. After the initial shock passed, the smugglers worked on solutions: Russia took less than 25 days to find solutions. Indeed, the Kremlin is forced to sell its oil at lower prices and pay more for its transportation. There are many disorders, and part of the production has not yet found a end customer, forcing some tankers to become temporary floating warehouses. But, overall, oil is still flowing.

This is a shameful failure of political action. While Western governments refuse to pay higher oil prices as a cost of “mutilation” of the black market, Russia, Iran and Venezuela will continue to sell their barrels.

*Javier blas is a column of Bloomberg Opinion column and covers energy and goods issues