Ahmadinejad’s Iran faces EU and American oil sanctions.

July 1^st marked the beginning of European and American embargoes on Iranian oil exports. Since then the sanctions have been effective at squeezing Iran because, in the past, the European Union has been the largest importer of Iranian crude and condensate products. In recent years total Iranian production has hovered around 4 million barrels per day, but dropped in July to around 2.8 million barrels per day.

In an effort to avoid shutting-in huge production volumes, and risk damaging mature and fragile reserves, Iran began to store it’s excess production volumes in it’s tanker fleet. This was only a temporary solution. With the fleet quickly bumping up against its storage capacity of approximately 42 million barrels, Iran has resorted to sneakier alternate strategies. The New York Times reported in July that some Iranian tankers are receiving fresh paint, and many ships belonging to the National Iranian Tanker Corporation (NITC) are flying “flags of convenience,” in an effort to disguise the origin of the crude onboard. These counter-efforts seem, at a minimum, to be keeping any additional pressure off the Iranian government; production saw a slight increase in August.

The West’s reasoning for imposing the sanctions is to strong-arm Iran into abandoning its uranium enrichment program, but Iran is insistent on pursuing its nuclear program and may be able to partially circumvent the embargo. And, as a recent article in The Economist points out, such embargoes often end up punishing the poorest in society, while those in power stay the course. The motivation behind the sanctions might be defensible, but their effectiveness at manipulating Iranian nuclear policy isn’t yet clear. It will be interesting to see who blinks first.