As the geopolitical drama between not only Iran and the U.S., but between the U.S. and its EU allies unfolds over Trump’s decision to pull out of the 2015 Iranian nuclear deal, Iran is vowing that U.S. sanctions can’t touch its oil exports. Of course, there is one caveat in that claim and that is based on possible EU refusal to adhere to U.S. stipulations over renewed Iranian sanctions.
"Tehran’s oil exports to remain unchanged if the Iran nuclear deal is salvaged by the EU following the US withdrawal from the multinational accord," Zangeneh told reporters after his meeting with EU Energy Chief Miguel Arias Canete in Tehran over the weekend.
Zangeneh said that every new decision in the Organization of the Petroleum Exporting Countries (OPEC) needs unanimity, and added, "I believe that if the European Union helps us, the level of our oil exports will not change."
It’s a bold statement even considering the geopolitical and economic heft that EU members can bring to the table over a collective refusal to adhere to U.S. sanctions demands over Iran.
EU asserts its independence
On Friday, the EU took its pivot away from U.S.-hegemony a step higher when it announced a series of steps to counter U.S. sanctions over Iran’s nuclear ambitions, including enabling member states to make direct payments for oil to Iran’s central bank as well as the revival of a 1990s blocking statute that allows EU firms to ignore U.S. sanctions without fear of reprisal from Washington.
The problem, however, with the EU’s renewed sense of itself is that it likely won’t work. For starters, the bottom line in any new tensions with Washington forces both the EU as a collective body and each adhering member to effectively choose either the U.S. or Iran. Given the influence, economic size and wide ranging political reach of the U.S., it may be hard to conceive EU members trying to push back against Washington.
Even forward-looking French president Emmanuel Macron, that failed in his charm offensive during his recent Washington visit to dissuade Trump from pulling out of the Iranian nuclear accord, has stated that he doesn’t want a trade war with the U.S. over Iran.
Any hope that a hawkish-Trump administration could possibly change its mind or be bullied by Europe, a region that has seen its political and economic influence wane in recent decades, is ill-founded.
On Monday, newly appointed U.S. secretary of State Mike Pompeo actually ratcheted the intensity of the ongoing rhethrotic up another notch. He threatened to impose the “strongest sanctions in history” ever on Iran.
Pompeo, Trump’s former director of the CIA, demanded major changes from Iran and said America will not allow the country to develop a nuclear weapon: "Not now, not ever."
"This is just the beginning. The sting of sanctions will be painful," Pompeo said. "These will be the strongest sanctions in history when complete."
Pompeo also said that Tehran must stop developing ballistic missiles, release Americans who are being held in prisons in the country and stop support of militant and terrorist groups in the Middle East and beyond. He also called for a ban on a heavy-water reactor, which is the most basic way to develop nuclear energy.
"Iran will never again have carte blanche to dominate the Middle East," he added.
While Pompeo’s remarks leave little doubt that the Trump Administration has Iran’s nuclear ambitions and its growing influence in the Middle East, including the ongoing Syrian civil war, in its cross hairs, the impact, at least in the short to mid-term on oil markets will be muted.
Analysts predict that around 500,000 barrels of oil per day or higher could be removed from the market. Though marginal amounts of reduced supply can weigh heavily when markets are nearing an undersupply scenario, these barrels can be made up, at least in part, by Saudi Arabia who has indicated it would step in to make up for the loss of Iranian barrels, Russia and others, including U.S. shale oil production that has a feeding frenzy any time oil price s spike.
With global oil prices reaching three year highs, and with U.S. shale producers taping wells that see the bulk of its profits during the first few years of production as opposed to conventional wells that see profits spread out over a long time horizon, Iran’s hope that the EU can rescue its oil exports and any hope that oil markets will miss its barrels may be just a pipe dream.
By Tim Daiss for Oilprice.com
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