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Iran's Coming Presidency of OPEC is Less Significant than it Seems

While officials in Tehran are excited at the prospect of Iran taking over the chair of the international oil producers’ grouping OPEC, analysts say the honour is less significant than it seems, and comes at a time when stagnating crude production deprives the country of leverage in the organisation.

Iranian Oil Minister
Iranian Oil Minister, Masoud Mir-Kazemi will take over the presidency of the OPEC Conference in 2011

The post will at least offer Tehran an opportunity to deflect attention from economic difficulties and the effects of international sanctions at home.

News that Iran was to chair the OPEC Conference for the first time in 36 years was formally announced when the body met in Vienna in mid-October.

Iranian lawmakers and officials hailed the announcement as a major coup for the country

Gholam-Ali Meigolinejad, who sits on the parliamentary committee for energy, told ISNA news agency that it was a victory at a time when “global arrogance is trying to isolate the country”. It was, he said, proof of the “futility of international sanctions.”

Other lawmakers suggested Tehran could use its role to reform the international oil system.

“Iran should lead OPEC members, through the right decision-making, so that oil will be snatched from the hands of international monopolists and returned to its rightful owners,” parliamentarian Emad Hosseini said in remarks quoted by local newspapers.

Nasser Soudani, also a member of parliament’s energy committee, predicted that Tehran “will be able to influence all global oil producers and determine realistic prices by reducing the influence of the major consumers.”

Meanwhile, a US State Department spokesman, Mark Toner urged other OPEC members to press Iran to play “a more constructive role in the region” during its time in the presidency.

In reality, Iran has not won the presidency of the OPEC Conference through diplomatic endeavour. Until 2007, the position – whose role is confined to coordinating the organisation’s twice-yearly meetings – was simply assigned to one member a year by mutual agreement. After that, the conference presidency was allocated by alphabetical order, so that after Algeria, Angola and Ecuador, it is now Iran’s turn.

Iran, as a founding member of OPEC, held the post of secretary general for three years in 1961-64, and the presidency in 1974. The incumbents, Foad Rohani and Jamshid Amouzegar, respectively, have been written out of history by the Islamic Republic, which never managed to capture these posts.

Oil analysts say the rotating presidency of the conference is much less important than the post of OPEC secretary general, a position from which Islamic Iran has been consistently blocked by Arab states like Saudi Arabia.

“Iranian MPs and government officials are over-stating this news because they’re unaware of OPEC’s structure,” a Tehran-based expert on OPEC told Mianeh.

The presidency is essentially an internal organisational position that carries little weight outside OPEC, he said.

“It’s the position of secretary general that’s very important and influential, and that isn’t going to be given to Iran because of the political lobbying,” he added.

Another reason why Tehran would be unable to make much of its role, the sector expert said, was that OPEC was less important in today’s world compared with the situation in the 1970s.

“In my view, OPEC’s role has been overestimated in Iran. Officials still believe it’s like the times when OPEC members could cause crises by merely turning the taps on and off,” he said. “In the last three years, OPEC has cut its output by four million barrels per day and hasn’t had much control over the market.”

The problem for Iran is that its view of pricing and production levels differs from the position taken by OPEC.

The global price of crude is now slightly over 86 dollars a barrel, with oil from OPEC members including Iran selling for less, in the range of 70 to 80 dollars a barrel. Iranian president Mahmoud Ahmadinejad, however, has repeatedly said he would like the price to be over 100 dollars a barrel.

At its October meeting, OPEC, which provides 35 per cent of the world’s oil, decided to hold prices at current levels, and also to leave its current production target of 24.8 million barrels a day in place.

In recent years, Iranian officials have backed an increase in the production quota, because of the revenues that would bring. But the reality is that as a result of international sanctions, Iran’s oil industry is today in no condition to boost production significantly from the current 3.3 million barrels a day.

The OPEC expert interviewed by Mianeh said there were real fears for the industry in the coming five years because “oil production is falling by 200,000 barrels every year, a decline that will become steeper if there’s no new investment in developing new wells and repairing old ones”.

He said OPEC’s own assessments indicated that Iran’s Azadegan field, which should have been producing 300,000 barrels a day by 2007, was only managing between ten and 20 per cent of this capacity three years on.

“The only way Iran can win more power in OPEC is to increase its output, and that doesn’t seem likely for the time being,” the expert concluded.

Iran’s traditional rival in OPEC over the last 50 years has always been Saudi Arabia, which produces more than double the amount of oil. But there is a new competitor to take into account – Iraq.

Iran and Iraq have in the past had similar OPEC quotas, but Baghdad is now demanding special treatment to make up for the three decades of under-production as a result of wars and sanctions. The Iraqis anticipated a rise in output last year when they signed contracts that could see production increase from 2.4 to 12 million barrels a day within six or seven years.

One point where Tehran can claim to have scored a point – albeit behind closed doors – is that the post of OPEC Conference presidency will be filled, as is usual, by the oil minister. The minister, Massoud Mir-Kazemi, was formerly a top commander in the Revolutionary Guards Corps and a senior defence ministry official, and according to his official biography, he still holds positions in these two agencies.

He will be able to take up the OPEC position despite the fact that since 2007, both the Revolutionary Guards and the defence ministry have been on the US list of organisations subject to sanctions for alleged involvement in the nuclear programme and for supporting terrorism.

By. Kaveh Sarafraz

This article originally appeared in IWPR.net and is produced by the Institute for War and Peace Reporting, www.iwpr.net




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