Sanctions leave Iran with few options for selling oil

(CBS News) For years, the U.S. and Europe have been trying everything short of going to war to get Iran to drop its nuclear program. That includes unprecedented sanctions. CBS News correspondent Anthony Mason looks into how those sanctions are working.

The oil trade funds about half of the Iranian government's budget. But under sanctions, Iran's oil business has suddenly sprung a leak. The International Energy Agency predicts that by this summer, Iran's exports could be down by as much as 30 percent.

"It's certainly rattling the economy," said Mark Dubowitz, a sanctions expert with the Foundation for Defense of Democracies, "and, I think, shaking a regime that for the first time since the Iran-Iraq war is seeing it's oil wealth fundamentally threatened."

Last month, said Dubowitz, when Iran's banks were cut off from SWIFT, the system that processes global payments, Iran had to resort to barter deals.

China, India and South Korea have set up bank accounts in their countries to pay Iran for oil. But Iran must spend that money there on goods and services it often doesn't need. It's unable to transfer the cash home.

"These Asian countries have the Iranians both literally and figuratively over a barrel," said Dubowitz. "They're able to buy Iranian oil at a significant discount and they're paying in their local currency."

Iran's oil minister this week claimed the discovery of a new oil field, but exports are falling.

"We have also heard from our shipping sources that they may be actually storing crude oil offshore because they can't sell it," said Kate Dourian, who monitors Iran's economy from Dubai for Platt's, the energy news service.

She added: "One of the main problems with this whole shipping issue is insurance cover."

European sanctions prohibit the insurance of Iranian oil.

"People buying Iranian oil, if they are willing to buy it, can't find tankers that are willing to carry it," said Dourian.

That has forced Iran back to bargaining table. Iran has agreed to appear at the U.N.'s nuclear talks in Baghdad next month.

  • Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"