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Iran's budget crisis to deepen as oil exports shrink: US State's Hook

Washington — Iran's economy could contract by as much as 14% this year as US sanctions strangle its oil exports and cut revenues by $50 billion, US State Department Iran envoy Brian Hook said Friday.

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"Due to the staggering loss in oil revenue, it is nearly impossible for the regime to put forward a credible budget," Hook said, adding that the country could soon face a banking crisis and potential hyperinflation.

Tehran's budget for the fiscal year starting in March assumes 1 million b/d in oil exports, which Hook called, "pure fantasy."

Iran's Supreme Leader Ali Khamenei said earlier Friday that the country's economy "must be strengthened," and "reliance on oil should stop."

Hook said US sanctions have cut Iran's oil exports by more than 2 million b/d and oil revenues by more than 80%.

Eurasia Group analyst Henry Rome agreed Friday with Hook that Iran's estimate for oil exports in next year's budget was far-fetched. Tehran is counting on oil to provide only 9% of revenues, down from 29% in the previous fiscal year, Rome said in a report last month.

"Without major US sanctions relief, Iran has no clear path to reach 1 million barrels," Rome said. "Even if Iran sold oil at $65/b in 2020, it would still need to export about 770,000 b/d to achieve the anticipated $18 billion in revenue."

Iran's crude and condensate exports, which averaged more than 1.7 million b/d in March 2019, slumped to around 500,000 b/d in the second-half of last year, according to Platts estimates.

Exports ranged between 400,000 b/d and 500,000 b/d in December, based on estimates compiled from shipping sources and cFlow, Platts trade flow software.

The country has had to resort to floating storage for its oil to cope with the surplus it has due to sanctions. Iran's oil tankers are holding almost 60 million barrels of oil at sea, the highest since more than three years.

Iran's production has fallen to its lowest level in more than three decades. Iran produced an average of 2.4 million b/d last year, down from 3.57 million b/d in 2018 and 3.79 million b/d in 2017, according to Platts OPEC survey data.