Iranian crude could return to global markets sooner rather than later as this week's start of negotiations between Tehran and the five world powers that, together with the U.S. signed the Joint Comprehensive Plan of Action that put an end to Iran's nuclear ambitions in 2015.
The Oil and Gas Journal reports, citing oil analytics firm Kpler, that the start of negotiations is a positive sign for things to come: soon, Tehran and Washington could too sit at the negotiating table. If this happens and they reach an agreement on Iran's nuclear plans, some 2 million bpd of Iranian crude could be added to OPEC's total.
The talks were held in Vienna earlier this week, and Iran's President Hassan Rouhani said, as quoted by CNBC, they were a success and that they opened a new chapter in efforts to save the so-called Iran nuclear deal.
Both Tehran and the new administration in Washington have signaled they are ready to start negotiating the lifting of U.S. sanctions and Iran's oil industry's return to normal operation. However, both sides insist that the other one makes the first move: Iran wants the U.S. to first lift sanctions before it stops enriching uranium, and the U.S. wants Iran to first stop enriching uranium before it lifts the sanctions.
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Yet not everything has been smooth. An attempt by Washington to offer a sort of an olive branch to Tehran failed earlier this year. The attempt consisted of the U.S. side offering Tehran to unfreeze $1 billion in oil revenues blocked under the sanction regime, but Tehran called the proposal ridiculous.
It is important for both sides to settle their differences sooner rather than later. Iran is preparing for elections, and if the current government is replaced with a more conservative one, negotiations will become a lot harder. If they succeed, however, OPEC will have a problem on its hands, although it may not be as big as some would expect.
Iran is already exporting more oil than official numbers would suggest, mostly to China. This oil will simply come to light once the sanctions are lifted. Perhaps a bigger problem, for U.S. oil producers at least, is that Iranian oil will start flowing to India as well, and may displace some U.S. volumes that India has been taking in after it stopped its purchases from Iran because of the U.S. sanctions.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
However, I don’t think we will see a lifting of sanctions even by 2023. Without the United States agreeing first to lift the sanctions or easing them considerably, Iran won’t even negotiate with the Biden administration. On the other hand, the United States won’t lift the sanctions without Iran agreeing to renegotiate the nuclear deal.
From the United States’ point of view and its allies’, renegotiating the nuclear deal means Iran’s relinquishing its nuclear and ballistic missiles programmes which are sacrosanct. Iran would rather stay under sanctions for ever or even go to war rather than relinquish these programmes.
Even if and when Iran does return to pre-sanction export level, it couldn’t add more than 625,000 barrels a day (b/d) to the global oil market being the difference between its pre-sanction exports of 2.125 mbd according to the 2019 OPEC Annual Statistical Bulletin and reported exports of 1.5 mbd under the sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London