The squeeze is already beginning on Iran’s oil exports – and guess which nation quietly reduced its purchases from Tehran this month. Why, that would be China, Iran’s supposed protector.

The Chinese cut their imports from Iran roughly in half for January, trimming 285,000 barrels per day from their average last year of about 550,000 barrels per day, according to Nat Kern, the publisher of Foreign Reports, a respected industry newsletter. Iran’s reduced sales to China, its biggest oil customer, resulted from a dispute over payment terms, Kern explains. But it’s an early sign of what may be significant reductions in Iranian exports to Europe and Asia, as buyers there hedge against the likelihood of tighter sanctions.

Here’s how Kern and other oil industry analysts add up the potential dents in Iran’s exports, which were 2.2 million barrels a day last year. First, U.S. allies are considering sanctions: Europe has agreed on an embargo that by year-end could cut about 450,000 daily barrels; Japan is talking about cutting 100,000 barrels; South Korean officials have discussed a reduction of 40,000 barrels.

Even nonaligned countries are getting nervous about Iran’s reliability: Indian refineries, for example, bought extra oil from Saudi Arabia in January “just in case.” The oil-market action shows how pressure by the U.S. and its allies is affecting the Iranian economy. Analysts reckon that even if sanctions are only partly successful, Iran is likely to lose about 20 percent of its oil export volume and 25 percent of its revenues. For an economy that is already weak, that loss of revenue will be painful.

What’s driving this new squeeze is legislation signed Dec. 31 by President Barack Obama, which authorizes him to ban dealings with the Iranian central bank. These new sanctions would prevent Iran from selling or shipping oil through normal channels. The Iranians and their buyers might find alternate financial arrangements – “special purpose vehicles” to handle the transactions – yet buyers would probably demand discounts, reducing Iran’s revenues. Iran could also smuggle oil through Iraq, but again, only at a discount.

The payments haggle between Iran and China illustrates Tehran’s new vulnerability. According to Kern, the Chinese cut the 285,000 barrels when Iran refused a request for better credit terms. The difference amounted to 50 cents a barrel, but the Iranians apparently feared that if they gave China a discount, other purchasers would want one, too.

As China puts the screws to Iran, it is warming its relations with Saudi Arabia – which can cushion the market by tapping its 2 million barrels a day of spare capacity. A symbol of closer Sino-Saudi contact was the visit to Riyadh last weekend by Prime Minister Wen Jiabao, who inked a $10 billion joint refinery project.

“We are supplying our crude, but receiving the money with some difficulty – for sure,” said Mohsen Qamsari, director of international affairs for the Iranian national oil company, in an interview this month with Reuters cited by Kern.

Kern says Iran probably won’t be able to restore the lost exports to China until March or April. “At that time, the Obama administration could point to a substantial reduction in China’s imports of Iranian crude as a basis for excepting Chinese banks from the punitive measures,” explains Kern’s current newsletter. Administration officials say they hope to avoid sanctioning China, which among other things is America’s biggest creditor.

Can the U.S.-led effort cripple Iran’s oil exports without triggering a panicky price rise in the market? The problem is eased in part by Saudi Arabia’s extra margin of capacity. Saudi officials have said they aren’t seeking to replace Iranian oil, but simply to supply what the market needs – still, the effect is the same. Meanwhile, increased production from Libya and Iraq will likely add another 500,000 barrels a day. Experts reckon there’s a buffer of about 3 million barrels a day – making for a thin cushion of spare capacity if all 2.2 million barrels of Iran’s exports were somehow curtailed.

And what will Tehran do, if Europeans and Asians reduce purchases of Iranian oil? Probably load it in tankers – carrying 40 million barrels or more – and park them outside the Strait of Hormuz. The Iranians might imagine they’d be sitting pretty if they tried to close the strait – but experts note their floating reserve would also be hard to protect, and vulnerable to seizure.

And all that extra oil afloat might have a downward effect on prices, notes Kern. Almost any way you look at it, Iran is likely to have an oil problem in 2012.

David Ignatius is published twice weekly by THE DAILY STAR.