Iran is preparing to start expanding its crude oil exports ahead of Joe Biden's inauguration in January in a clear sign it expects better bilateral relations with the U.S. during the next administration.
"Due to sanctions before the Joint Comprehensive Plan of Action (JCPOA), oil production and sales faced restrictions, but with the implementation of the deal and the lifting of sanctions, we were able to increase oil sales to more than two million barrels in a short time, and despite valuable operational tools and experience, there is still readiness today to rapidly increase further oil production," Rouhani said during a meeting of the Iranian Cabinet's Economic Coordination Board on Sunday.
According to a Bloomberg report citing another statement of Rouhani, Iran should be ready to return to pre-sanction production and exports within three months.
Iran ramped up its oil exports to well over 2 million bpd after it struck the so-called nuclear deal with Western powers and Russia, which obliged it t stop its uranium-enrichment program. Now, according to JP Morgan, Iran could boost oil exports to 1.2 million bpd if it strikes another deal with Biden.
This would come at the worst possible time for Iran's fellow OPEC members and their partners led by Russia, as this 1.2 million bpd—or however much Iran ramps up—will come on top of uncontrolled growth in Libya's oil production as the country is exempt from the OPEC+ cuts.
However, an agreement is not yet certain. Last week, Iran said it would not accept preconditions from the U.S. to restart their talks on the nuclear deal. The U.S. president-elect, on the other hand, said he would only lift the sanctions imposed on Iran by President Trump if Iran returns to "strict compliance with the nuclear deal". In response, Iran's Foreign Minister Javad Zarif said Washington had its own "commitments".
By Irina Slav for Oilprice.com
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However, Iran has very cleverly managed to evade US sanctions and export by one way or another an estimated 1.5 mbd or 71% of its pre-sanction exports. Even if the sanctions were lifted, Iran couldn’t add more than 500,000 barrels a day (b/d) at best to the global oil market.
But we are nowhere close to a lifting or even easing the sanctions under President-elect Joe Biden. At the top of Joe Biden's to-do list is to control the COVID-19 pandemic which has been ravaging the United States and revive the US economy which shrank by 32.9% in the second quarter of 2020 and still contracting.
And while President Biden has said that he would like to return to the Iran nuclear deal once Iran has agreed to comply with its stipulations, I doubt very much that Iran would be prepared to renegotiate the deal without the United States lifting the sanctions first or at least ease them significantly. This is something the United States will not accept to do and therein lies the rub.
Moreover, Biden will come under intense pressure from Israel and US allies in the Arab Gulf to not re-join the nuclear deal or lift the sanctions. Whether under Trump or Biden or any other US president, Israel comes first in US strategic goals even before US own interests. Israel will always control the decision maker in the White House through the Israeli lobby and its immense influence in the US Congress. So nobody should bank on a lifting or even easing of sanctions on Iran soon.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London