At the height of the Yom Kippur War in 1973, Iran enthusiastically joined other OPEC countries in an oil embargo against Israel's Western allies. Then one of the world's biggest producers, the Islamic Republic had helped found the producer group a decade earlier.
Fast forward to today, and Iran has been relegated to a bit-part player in the oil market, weakened by US sanctions, the erosion of key alliances and its dependence on China for all its crude exports.
Amid ongoing strikes by Israel on domestic energy infrastructure -- and facing the loss of its nuclear program -- a former oil heavyweight looks economically weak and isolated, potentially explaining its recent openness to discussing a new nuclear deal.
"Iran is not a major OPEC producer any longer, and the industry in Iran has suffered from long-term lack of investment and technology," Karen Young, a senior fellow at the Middle East Institute, told Platts.
Iran pumped 3.24 million b/d of crude in May, according to the latest Platts OPEC+ Survey from S&P Global Commodity Insights. It marks a strong recovery from mid-2020, when US President Donald Trump's maximum pressure sanctions campaign and the coronavirus pandemic pushed output down to 1.95 million b/d.
But it is a far cry from its pre-revolution days in the 1970s when it pumped over 6 million b/d.
As output has waned, so has its role within OPEC, hastened by the rise of Arab producers, particularly Saudi Arabia and the UAE, and the 2016 alliance with Russia-led allies to form OPEC+.
Today, Iran is exempt from quotas due to US sanctions targeting its exports, giving it scant influence in policy discussions. And in 2022, when Iran called for an oil blockade against Israel as it stepped up its war with Hamas, the alliance -- whose members sell crude to Israel -- shrugged.
Indeed, Tehran's most significant role within OPEC+ today may be inadvertently freeing up the group to return barrels to the market, with Trump threatening to drive Iranian oil exports to zero. OPEC sources told Platts that expected sanctions on Iran and Venezuela -- which were relaxed under Joe Biden as the US focused on Russia -- were among several considerations when eight OPEC+ members discussed unwinding 2.2 million b/d of production cuts.
"Frankly speaking, OPEC is the one and only diplomatic channel for Iran," one source familiar with Iran's role told Platts back in March. "It offers an opportunity for Iran to be able to carry out some political talks with countries to mediate for Iran."
The OPEC secretariat in Vienna did not respond to a request for comment. Iran's oil ministry could not be reached.
Chinese reliance
Carole Nakhle, founder of consultancy Crystol Energy, said Iran has been the victim of a transformed oil market.
"Iran's influence on oil markets has diminished significantly not only because of its 'constrained output' and limited investment but primarily because oil markets have changed significantly, especially in terms of increasing competition both from the region and elsewhere."
Iran still holds 12% of the world's oil reserves and its crudes play an important role in the medium and heavy sour complex, with grades such as Iran Light and Medium and Forozan constituting a chunk of the relatively tight sour crude market.
Yet Iran relies on just one country, China, for all its crude exports, much of it shipped on rickety decommissioned vessels that form the vast "shadow fleet".
Iran exported 1.6 million b/d in May, some of it via Singapore, according to data from S&P Global Commodities at Sea. That compares with 2.6 million b/d on average in 2017, to refiners in China, India, South Korea, Turkey, Italy and elsewhere.
Iran hopes to boost output to 4 million b/d, according to officials, but has seen drilling activity wane, with the G7's Financial Action Task Force blocking imports of new technology and foreign upstream investment. As a result, it relies largely on domestic companies and financing to drill new wells.
"If sanctions were relieved, production could increase... but we are not looking at a market that is necessarily looking for increased production from Iran, with plenty of spare capacity within OPEC from the Gulf and new non-OPEC supply available," said the Middle East Institute's Young.
The US has also sought to disrupt Iran's relationship with neighboring Iraq, long a key export market for Iranian gas and power and fertile ground for oil and fuel smuggling. Iraqi officials say they have boosted condensate production amid a decline in Iranian gas supplies since mid-2024.
The election of reformist President Masoud Pezeshkian in 2024 raised the prospect of a thaw with Western countries and a bigger role for Iran in the oil market, with talks over a new nuclear deal, but Israel's bombing campaign appears to have scuttled such hopes.
'Isolated and weak'
So far, Israel's attacks have hit domestic oil and gas infrastructure, including the South Pars gas field, Kangan port and oil depots near Tehran. Critical export infrastructure, including the Kharg oil terminal, which handles 90% of Iranian oil shipments, remains operational.
There are already signs of potential fuel shortages in Tehran, with large queues at retail points, according to sources.
John Evans, an analyst at PVM, said an already "isolated and weak" Iran would see its economy collapse without oil revenues.
"With a failing economy, raging inflation and unemployment... Tehran needs all the help it can get. That help comes in the form of petrodollars, it has little else in the economy to match it," Evans said.
"An arguable insight into Tehran's thinking is that it was at pains to point out that the attack of Friday [June 13] did no damage to its oil industry, even though a fuel depot was blown up on the outskirts of Tehran at the weekend. If it wants to keep doing business with China and to a lesser degree India, it must reassure that oil will keep flowing."
An enfeebled Iran does have sway through its proxies -- Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen -- and shutting down the Strait of Hormuz, a key regional chokepoint through which some 20 million b/d of crude, condensate and refined products flows, remains a card in its hand.
But even the groups Iran backs have shied away from participating in its military response to Israel's strikes, while a Hormuz shutdown would alienate Gulf oil producers, who have expressed solidarity with Iran in recent days.
As a result, officials in Tehran might now be counting the cost of their loss of oil market influence.