China Imports 2 Million Barrels More Iranian Oil, Likely For Reserves

In a meeting Sunday, the heads of the three branches of the government – President Ebrahim Raisi, Speaker Mohammad-Bagher Ghalibaf, and Chief Justice Gholam-Hossein Mohseni-Ejei – approved an annual cap of 25 percent increase in rents in Tehran and 20 percent in other cities. The meeting also decided to put a double-urgency bill to control rental prices on the agenda of the parliament this week.

On Wednesday, the parliament hastily approved the general outlines of the legislation to control the rental market, as many tenants complain that asking prices are up to 100 percent higher than last year.

High rents are pushing many people to outlaying suburbs of Tehran and many families are becoming homeless amid an explosive social and political environment.

Abdollah Otadi, a board member of Tehran Real Estate Consultants Union, says rents have risen 300 percent in the last three years in the capital, with the bulk of this occurring in the last few months.

Landlords in Iran often require large sums of rental security deposits or outright additional cash payments to agree to sign a lease. Some landlords seek higher deposits to use for investment in more properties or in their businesses. Higher deposits can considerably decrease the amount of monthly rent so many tenants also prefer to use their savings as deposit to pay less rent.

In 2020, as the housing crisis reached new heights, particularly in larger cities such as Tehran, former President Hassan Rouhani’s administration came up with a plan to pay rental deposit loans to eligible tenants. According to the government scheme, banks pay the sum directly to landlords and tenants are responsible for payment of monthly interest instalments at a rate of 13 percent.

Rental deposit loans were unprecedented before the recent crisis, but now banks pay up to $3,000 in local currency as rental loans, which is a huge amount of money in Iran.

Purchasing even low-cost housing has increasingly become unaffordable to the Iranian middle class as prices continue to rise due to high inflation and devaluation of the national currency which has lost its value almost by tenfold since 2017 when former US president Donald Trump signalled his intention to withdraw from the 2015 nuclear deal with Iran.

Demand, however, is high as many with money, including banks, rush to buy property, gold or foreign currency to preserve the value of their assets in such circumstances. According to a report by the Central Bank of Iran, the number of apartments sold in Tehran from April 21-May 20 increased by 166 percent compared to the same period in 2021.

Experts say devaluation of the national currency is the foremost factor for the quick rise in real estate prices and rents in recent months as rising inflation usually manifests itself with a delay of a few months. They also say the government will not be able to enforce the 25 percent rent increase cap.

As the currency drops against the US dollar, real estate prices rise accordingly, because land and buildings are one of the safest ways to protect capital from depreciation of the currency. When housing prices rise in local currency, so do rents and government decrees cannot be effective.

According to the Meteorological Organization of Iran on Tuesday, temperature in the city of Abadan hit a staggering 52.2 degrees Celsius – or about 126 degrees Fahrenheit – a new record for the city and the province for June temperatures for the first time in 70 years, when the city’s weather station was established. 

Factoring in the humidity in the province, it is practically impossible to determine how hot it actually feels as the weather cannot fit on the heat index (HI) -- that combines air temperature and relative humidity. 

The heat wave in Khuzestan follows reports about a new wave of drought in the province.

The flow in downstream areas of the Dez River, which is a 400-kilometer-long tributary of the Karun River, has decreases drastically, alarming environmental activists and villagers.

In 2021, large-scale water protests took place in two important provinces, Khuzestan and Esfahan, with several people killed and hundreds injured by security forces.

Iran has been suffering from drought for at least a decade and this year officials are warning of a further decrease in precipitation.

Authorities said earlier in the month that water inflow into Tehran’s dams decreased by about 21 percent since March compared with last year.

As drought persists, more underground water is exploited for irrigation, depleting natural reservoirs formed during thousands of years. The drought has also led to a reduction in hydroelectric power generation.

Russia shipped 8.42 million tons of oil to China, or about 61.5 million barrels in May, 55 percent higher than a year earlier after many countries stopped buying its crude after the invasion of Ukraine. This amounts to roughly 2 million barrels a day, while Saudi Arabia shipped 7.82 million tons. The figures came from the Chinese General Administration of Customs.

Previously it was reported that Iranian shipments to China had dropped by as much as 50 percent in May due to Russian competition, but the official Chinese figures, which show only a part of imports from Iran, do not indicate a drop, at least in the officially imported crude. Iran shipped 260,000 tons or less than 1.9 million barrels, which is just over 61,000 barrels per day.

But Chinese Customs figures do not reflect the full picture of Iranian oil imports, because of United States third-party sanctions, which could penalize companies buying Iranian crude. Most of Iran’s shipments go through Malaysia and are imported as such. Iranian tankers have been transferring their cargo to other tankers in Asian waters that carry it to China as oil coming from other countries.

Russia, Iran and Venezuela offer steep discounts to China, which despite less demand because of the COVID pandemic and a slowing economy, prefers to replace other supplies with oil from those sanctioned countries. As a result, more supplies from the Middle East and Africa will be freed up for countries that do not buy Russian oil. As of May, the extra Russian oil China bought amounted to around million barrels a day compared with 2021.

But any reduction of Iranian exports to China will have a serious impact on the finances of the government in Tehran that has embarked on eliminating subsidies, in a tricky and risky political balancing act.

In early May, it eliminated a food import subsidy that cost between $9-15 billion a year depending on whose figures one considers. Iranian officials are notorious for announcing widely different and sometimes contradictory economic data.

Next in line seems to be a reduction in huge fuel price subsidies. The elimination of these subsidies is impoverishing a low-paid population, fueling almost non-stop protests. The government promised cash assistance to low-income people in lieu of eliminating subsidies, but this would need oil income. Otherwise, the government must keep printing money with the risk of inflation becoming triple digit.

The government has a clear choice of reaching an agreement with the United States to restore the 2015 nuclear deal known as the JCPOA, which would lift crippling sanctions on Iran’s oil exports and international banking, but apparently it has been counting on illicit oil sales to China as a way of muddling through. In the meantime, it has accelerated it nuclear program, either to build more leverage in the talks or to actually achieve the status of a nuclear threshold country.

Following a report by Radio Farda that cited the self-proclaimed Russian-backed president of Ukraine Denis Pushilin as announcing the agreement, the Iranian government's news website IRNA quoted “an informed source” in the Iranian Foreign Ministry denying the report while another Iranian state-run media says the deal was signed during the St. Petersburg International Economic Forum, which was held in the city from June 15 to 18. 

According to the Young Journalists Club (YJC), a hardliner news outlet with links to the IRGC and an affiliate of the state broadcaster IRIB, Pushilin has said "The Donetsk People's Republic has a new partner now, and despite obstacles, our international economic relations are expanding.”

The agreement will see Iran supplying Donetsk with construction materials and horticultural products, including fruits and vegetables, while Donetsk, in turn, intends to export metals, cast iron, fertilizers, steel products, coal mining tools, as well as other types of mining equipment to Iran.

Radio Farda said that Pushilin mentioned Farnoush trade company – headquartered in Maku Free Zone in Iran’s West Azarbaijan province on the border with Turkey – as the company representing Iran in the agreement. 

Russia recognized the independence of two breakaway regions of Donetsk and Luhansk in February, which practically paved the way for the Russian invasion of Ukraine and deployment of Russian troops there.

Pompeo told Fox News on Sunday, "The stability that we had built during our four years has now just been squandered and thrown away. They’re putting us all at risk."

While the Biden administration is hoping to “appease” Iran, it is possible that the Iranians could shut down the Strait of Hormuz and drive energy prices even higher, he said while enumerating challenges currently facing the administration ahead of Biden’s visit to Saudi Arabia, which is reportedly aimed at reducing skyrocketing gas prices and confront Iran’s nuclear weapons program.

Pompeo criticized Biden’s energy policy to fill the need for more oil and gas in the market from foreign sources, saying that instead of energy producers within the US, “they started with the Iranians and the Venezuelans and now have moved to the Saudis.” “American energy is the right place to start”, he added

"When you side with the Iranians, when you side with the world’s largest state sponsor of terrorism, against Israel, and against Saudi Arabia, and against the Emirates, the leaders of those countries no longer have confidence in the United States, and the chance that they’re going to do a solid for Joe Biden is exceedingly low," he said.