Last week, the US president Barack Obama signed a raft of new sanctions against Iran, targeting the Iranian rial currency and the car industry.
Foreign lenders and financial institutions that deal with the rial or maintain accounts denominated in the currency will be subject to sanctions.
The ban also extends to anyone involved in the bulk trade of Iran's car industry. Saipa, the country's second-biggest car manufacturer, could be hit hard. It is popular in Iraq because it is substantially cheaper than the other foreign models available. In 2007, the company launched a factory in Syria.
Several financial institutions have been caught out doing business with Iran.
In December 2011, the US Treasury forced Dubai's Noor Islamic Bank to end its relationships with Bank Saderat Iran and Bank Melli Iran.
"[Arabian] Gulf-based firms are under intense pressure to comply with sanctions directed against Iran," says Anthony Skinner, the head of the Mena practice at Maplecroft, a British risk analysis company. "Sanctions combined with the weakness of the Iranian real - meaning that it is more expensive for Iran to import - explains the downward trend."
Meanwhile, the ban on Iranian crude dealing has benefited oil producers in the region, Mr Skinner says.
"Gulf states have increased crude production to compensate for a drop in Iranian crude exports as Asian states such as China and India have come under pressure from the US and Europe to cut their demand for Iranian crude."
Saudi Arabia's state-owned heavyweight Aramco said late last month production reached record levels last year as it took up slack created by the embargo on Iranian oil.
Western sanctions drove Iran's crude exports to the lowest in decades last month, Reuters reported yesterday, citing industry sources and tanker-tracking data.
Crude shipments dropped to 700,000 barrels per day (bpd) last month, the data showed, about a third of Iran's oil exports before the current round of sanctions.
US and European sanctions aimed at pressuring Tehran over its suspected pursuit of nuclear weapons have already more than halved Iran's shipments - costing Iran billions of dollars in revenue since the start of last year.
And Washington is now seeking to cut shipments to less than 500,000 bpd through tighter sanctions.
With oil trading just above US$100 a barrel, the decline in May exports versus April would mean a loss of more than $300 million for Iran, squeezing revenue for a nation that has already seen its currency plunge.
The drop in purchases last month, if confirmed by official import data, would increase the prospect of Washington granting Tehran's top buyers more leeway to avoid US penalties even if they maintain Iranian oil purchases.
The United States is expected to renew waivers on Iran oil sanctions for India, China and several other countries soon.
Before the latest sanctions, Tehran sold about 2.2 million bpd of crude mainly to Asia, Europe and Africa.
Aramco says Saudi Arabia's total oil production increased to almost 3.5 billion barrels last year.
[ halsayegh@thenational.ae ]
