It’s hard to predict what will happen in the oil market as the U.S. sanctions on Iran tighten. For now, it looks like India, Japan, South Korea and Turkey will hold off from buying Iranian oil. These countries — with China — had been the main sources of Iran’s foreign exchange. It is unlikely — at the present time — that India, Japan, South Korea and Turkey will break the U.S. siege on Iran. They have made it clear that they do not want to rattle the U.S. cage. Request for new waivers from the U.S. came to naught. India’s government had said that it would reassess the purchases of cheap Iranian oil after the elections. It is likely that India will restart some buys, but certainly not enough to prevent economic collapse in Iran.
As the May deadline for the U.S. sanctions loomed, these countries bought vast amounts of oil from Iran to create their own buffer stocks. Revenues from the export of oil reached $50 billion for the Iranian financial year of 2018-19 (ending March 20). The oil sector contributed to 70 percent of Iran’s exports. This income is essential for running Iran’s government and paying its 4.6 million employees. The cost of the government is roughly $24 billion. With the collapse of sales to India, Japan, South Korea and Turkey, Iran will have a very difficult time raising revenues to maintain its economy. The National Development Fund and the hard currency reserves have already begun to be depleted, with dollar holdings now in the tens of billions.