The surge in smuggled Iranian crude oil barrels heading to China might hinder OPEC+ efforts to balance the global markets. This is not just due to the fact that these are illegal barrels and outside the international financial system, but because they are outside the OPEC+ production ceiling at a time when the bloc is working tirelessly to balance the market and stabilize the global economy. Iran is taking advantage of the current OPEC+ oil market strategy to sell its smuggled barrels at great discounts, below the international oil benchmarks. Though Iran is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), US sanctions mean its barrels are currently outside the production output cuts strategy. Iran’s ability to return to pre-sanctions crude oil export levels of about 2.6 million barrels per day (bpd) is still questionable. Its production has risen steadily since the US elections last November, as it produced 2.14 million bpd in January, its highest level since November 2019, according to S&P Global Platts. In November 2020, Iran was able to export nearly 1 million bpd of oil and condensates, mostly to China. This is a sharp rise from last year’s export levels, when strict US sanctions reduced its exports to about 500,000 bpd. This increase in Iran’s oil exports came in conjunction with the rise in China’s crude oil imports to an average of 11 million bpd in January and February, up more than 20 percent from December 2020. This coincided with the increase in oil prices, which Iran has benefited greatly from and has been able to sell its crude oil with huge discounts below market prices. Chinese fuel consumption has recovered close to pre-pandemic levels, so Beijing has benefited from the lower prices offered by Iran. Iran is also taking advantage of the conflicting international stance toward the chaos that it has spread across the region, with the help of income from these smuggled barrels. Tehran said between 2012 and 2015 it was selling oil by “unconventional” means, in a bid to circumvent American sanctions, because if they were disclosed the US would stop them immediately. This was largely done through commodity swaps with China after giving large discounts. During those years, oil prices were above $100 per barrel and huge discounts were granted to China. Chinese fuel consumption has recovered close to pre-pandemic levels, so Beijing has benefited from the lower prices offered by Iran. Faisal Faeq That being said, similarly, the huge discounts when prices are currently above $60 are not the same as discounts when prices were at $40 last year, which shows that Tehran has greatly benefited from the surge in oil prices since the beginning of this year. The Chinese commodity deals are a lifeline for Iranian oil companies, which have not been able to export in currencies other than the US dollar outside the global financial system. Also, Iran’s desperate attempts to persuade the EU to convert from dollars to euros, in a bid to circumvent economic sanctions, has failed. Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view