“Not only do they get less oil income," says an Iran analyst, speaking from Tehran on condition of anonymity, "but their ability to manage the exchange rate gets constrained as well.”
To manage the decline in oil sales and eliminate any unsold oil stored offshore, Iran has reduced daily oil production and offered discounts to foreign customers, who as a result of US and international sanctions must pay higher transaction fees and deal with a lengthier bureaucracy to buy Iranian oil, says a senior Iranian oil official.
“If we're sensitive about price, then oil stocks will rise again,” the official said. “We just want to sell.”
Iran hasn't released an official estimate of its foreign currency reserves since 2008, when the figure stood at just over $80 billion. Anecdotal evidence suggests that number has fallen by 35 percent to around $54 billion, according to interviews with local economists.
Since 2002, when Iran's Central Bank unified the country's street and official exchange rates to implement a managed floating-rate system, Iran's national currency has depreciated an average 3.25 percent per year, according to Central Bank statistics. Since the beginning of the Iranian new year in March, the exchange rate – currently around 10,600 rials per dollar – has depreciated an additional 3 percent.
Looking to Asian banks
Iran has managed to use small, local banks based in countries such as the United Arab Emirates, Turkey, and Malaysia to facilitate smaller cash transfers back to Iran. To deal with banking constraints for larger money transfers, the NIOC and Central Bank have engaged in book-to-book accounting with willing trading partners, primarily in Asia, whereby refineries buying Iranian oil pay the NIOC with the purchaser's local currency instead of US dollars.