LONDON: Turkey has steeply slashed Iranian oil imports in June, dealing another blow to Tehran's stretched finances as its crude exports towards even the most loyal customers plummet due to Western sanctions.
Iran, which relies on oil for more than half its budget revenues, is already seeing crude exports fall sharply from regular levels of last year as the West raises pressure to force Tehran to abandon its nuclear programme.
Loading data showed this week that Turkey, which is among Iran's top five customers, imported only three 150,000-tonne cargoes with Iranian crude in June through its two key ports of Aliaga and Tutunciftlik, averaging 110,000 barrels per day.
That represents a big decline from an average of 180,000 bpd imported last year and a huge slump from 250,000-280,000 bpd Turkey imported during some months in early 2012.
Trade between Turkey and Iran has risen sharply over the past decade, and Turkey was regarded as a possible weak link in the international sanctions against Iran due to a long history of close relations between the neighbours.
Relations, however, were strained by Tehran's support for Syrian President Bashar al Assad, while Turkey has sided with Syrians who have joined in the popular revolt against his rule.
In July alone, Iran's oil export revenues may halve to $3.4 billion from last year, according to Reuters calculations.
The Centre for Global Energy Studies (CGES) estimates Iran will be able to generate $42 billion this year from oil revenues, a massive decline from an all-time high of $73 billion in 2008.
The Islamic republic saw oil revenues at $72 billion in 2011 and some $43 billion in 2009 following a steep price collapse.
"Inflation in Iran is much higher than the official estimates of 20 percent and it is rising and there are shortages of all kinds of goods. They are eating into their forex reserves," said Leo Drollas, director and chief economist at the CGES. Iran relies on oil for more than half its budget revenues, according to CGES's estimates.
Turkey buys around a half of its oil needs from Iran and has already obtained U.S. sanction exemptions after having reduced purchases by around 20 percent from the 2011 average.
It has said it was prepared to cut imports by no more than an additional 10 percent from next year to persuade the United States to extend exemptions when they expire in December.
However, if June imports are confirmed by final customs data later this month, it would mean Turkey's purchases last month were much lower than its target reductions.
Tough new Western sanctions have stopped Iranian oil flows to Europe and are stifling supplies to Asia.
Top buyer China disputes freight costs with Iran's top tanker company. India, Iran's second-largest oil buyer, could also reduce July loadings as Iran struggles to find tankers of the size Indian refiners require.
Japan and South Korea, among Iran's top five buyers, have halted all Iranian imports this month due to complications with shipping insurance, also sanctioned by the EU.
"I'm not very pessimistic about a further decline in exports. I think they will be able to continue exporting around 1.2-1.3 million bpd through various routes and to various countries," added Drollas.